It looks like Tien Wah Press Holdings Berhad (KLSE:TIENWAH) is about to go 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 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 Tien Wah Press Holdings Berhad's shares on or after the 5th of July will not receive the dividend, which will be paid on the 31st of July.

The company's next dividend payment will be RM00.028 per share, on the back of last year when the company paid a total of RM0.056 to shareholders. Based on the last year's worth of payments, Tien Wah Press Holdings Berhad has a trailing yield of 6.5% on the current stock price of RM00.865. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Tien Wah Press Holdings Berhad

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. Last year Tien Wah Press Holdings Berhad paid out 104% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. 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. Tien Wah Press Holdings Berhad paid out more free cash flow than it generated - 194%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

Cash is slightly more important than profit from a dividend perspective, but given Tien Wah Press Holdings Berhad's payouts were not well covered by either earnings or cash flow, we would be concerned about the sustainability of this dividend.

Click here to see how much of its profit Tien Wah Press Holdings Berhad paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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 encouraging to see Tien Wah Press Holdings Berhad has grown its earnings rapidly, up 24% a year for the past five years. Earnings per share are increasing at a rapid rate, but the company is paying out more than we are comfortable with, based on current earnings. Fast-growing businesses normally need to reinvest most of their earnings in order to maintain growth, so we'd suspect that either earnings growth will slow or the dividend may not be increased for a while.