In This Article:
Readers hoping to buy Tree Island Steel Ltd. (TSE:TSL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Tree Island Steel's shares on or after the 31st of March, you won't be eligible to receive the dividend, when it is paid on the 15th of April.
The company's next dividend payment will be CA$0.015 per share. Last year, in total, the company distributed CA$0.06 to shareholders. Last year's total dividend payments show that Tree Island Steel has a trailing yield of 2.4% on the current share price of CA$2.55. If you buy this business for its dividend, you should have an idea of whether Tree Island Steel's dividend is reliable and sustainable. As a result, readers should always check whether Tree Island Steel has been able to grow its dividends, or if the dividend might be cut.
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. Tree Island Steel paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Tree Island Steel didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term.
See our latest analysis for Tree Island Steel
Click here to see how much of its profit Tree Island Steel 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 fall far enough, the company could be forced to cut its dividend. Tree Island Steel was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.