Tradelink Electronic Commerce Limited (HKG:536) stock is about to trade ex-dividend in four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Tradelink Electronic Commerce's shares on or after the 11th of May will not receive the dividend, which will be paid on the 25th of May.

The company's upcoming dividend is HK$0.065 a share, following on from the last 12 months, when the company distributed a total of HK$0.092 per share to shareholders. Based on the last year's worth of payments, Tradelink Electronic Commerce stock has a trailing yield of around 7.9% on the current share price of HK$1.17. If you buy this business for its dividend, you should have an idea of whether Tradelink Electronic Commerce's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Tradelink Electronic Commerce

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Last year, Tradelink Electronic Commerce paid out 100% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year, it paid out more than three-quarters (86%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's good to see that while Tradelink Electronic Commerce's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

Click here to see how much of its profit Tradelink Electronic Commerce paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Tradelink Electronic Commerce's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Tradelink Electronic Commerce's dividend payments are effectively flat on where they were 10 years ago.

To Sum It Up

Has Tradelink Electronic Commerce got what it takes to maintain its dividend payments? Earnings per share have been flat in recent times, which is, we suppose, better than seeing them shrink. Plus, Tradelink Electronic Commerce's paying out a high percentage of its earnings and more than half its cash flow. Bottom line: Tradelink Electronic Commerce has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Tradelink Electronic Commerce. Our analysis shows 2 warning signs for Tradelink Electronic Commerce that we strongly recommend you have a look at before investing in the company.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.