Asian Pay Television Trust (SGX:S7OU) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Asian Pay Television Trust's shares on or after the 16th of March will not receive the dividend, which will be paid on the 24th of March.
The company's next dividend payment will be S$0.0025 per share, on the back of last year when the company paid a total of S$0.01 to shareholders. Based on the last year's worth of payments, Asian Pay Television Trust stock has a trailing yield of around 9.3% on the current share price of SGD0.113. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Asian Pay Television Trust can afford its dividend, and if the dividend could grow.
View our latest analysis for Asian Pay Television Trust
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Asian Pay Television Trust paid out a comfortable 40% of its profit last year. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 15% of its cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see how much of its profit Asian Pay Television Trust 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about Asian Pay Television Trust's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Asian Pay Television Trust has seen its dividend decline 19% per annum on average over the past 10 years, which is not great to see.
To Sum It Up
Should investors buy Asian Pay Television Trust for the upcoming dividend? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. In summary, while it has some positive characteristics, we're not inclined to race out and buy Asian Pay Television Trust today.
While it's tempting to invest in Asian Pay Television Trust for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for Asian Pay Television Trust that we strongly recommend you have a look at before investing in the company.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.