The board of Medialink Group Limited (HKG:2230) has announced it will be reducing its dividend by 19% from last year's payment of HK$0.0042 on the 4th of November, with shareholders receiving HK$0.0034. The dividend yield of 7.5% is still a nice boost to shareholder returns, despite the cut.
Check out our latest analysis for Medialink Group
Medialink Group's Earnings Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Medialink Group was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.
Looking forward, EPS could fall by 18.4% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 61%, which is definitely feasible to continue.
Medialink Group's Dividend Has Lacked Consistency
It's comforting to see that Medialink Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2019, the dividend has gone from HK$0.013 total annually to HK$0.0121. The dividend has shrunk at around 1.4% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Has Limited Growth Potential
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 18% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.
Our Thoughts On Medialink Group's Dividend
In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Medialink Group is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 4 warning signs for Medialink Group you should be aware of, and 1 of them doesn't sit too well with us. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
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