It looks like Trans-Siberian Gold plc (LON:TSG) is about to go ex-dividend in the next 2 days. If you purchase the stock on or after the 26th of September, you won't be eligible to receive this dividend, when it is paid on the 30th of October.
The upcoming dividend for Trans-Siberian Gold will put a total of UK£0.02 per share in shareholders' pockets, up from last year's total dividends of UK£0.02. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Trans-Siberian Gold
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Trans-Siberian Gold paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Trans-Siberian Gold generated enough free cash flow to afford its dividend. Fortunately, it paid out only 33% of its free cash flow in the past year.
It's positive to see that Trans-Siberian Gold's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit Trans-Siberian Gold paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Trans-Siberian Gold has grown its earnings rapidly, up 48% a year for the past five years. Trans-Siberian Gold is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, two years ago, Trans-Siberian Gold has lifted its dividend by approximately 7.4% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.