International Housewares Retail Company Limited's (HKG:1373) investors are due to receive a payment of HK$0.056 per share on 24th of October. However, the dividend yield of 9.0% is still a decent boost to shareholder returns.
View our latest analysis for International Housewares Retail
International Housewares Retail's Dividend Is Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Before this announcement, International Housewares Retail was paying out 80% of earnings, but a comparatively small 22% of free cash flows. This leaves plenty of cash for reinvestment into the business.
Looking forward, could fall by 3.3% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 91%, which is definitely on the higher side.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was HK$0.04, compared to the most recent full-year payment of HK$0.112. This means that it has been growing its distributions at 11% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
Dividend Growth May Be Hard To Achieve
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that International Housewares Retail's earnings per share has fallen at approximately 3.3% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.
In Summary
Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for International Housewares Retail (1 doesn't sit too well with us!) that you should be aware of before investing. Is International Housewares Retail not quite the opportunity you were looking for? Why not check out our selection of top 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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