AV Concept Holdings Limited (HKG:595) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of September to HK$0.02. This takes the annual payment to 4.9% of the current stock price, which is about average for the industry.
View our latest analysis for AV Concept Holdings
AV Concept Holdings' Earnings Easily Cover The Distributions
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. AV Concept Holdings is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Looking forward, earnings per share could rise by 13.8% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 16% by next year, which we think can be pretty sustainable going forward.
AV Concept Holdings' Dividend Has Lacked Consistency
It's comforting to see that AV Concept Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the dividend has gone from HK$0.0167 total annually to HK$0.02. This works out to be a compound annual growth rate (CAGR) of approximately 2.6% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. AV Concept Holdings has seen EPS rising for the last five years, at 14% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for AV Concept Holdings' prospects of growing its dividend payments in the future.
Our Thoughts On AV Concept Holdings' Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think AV Concept Holdings 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 5 warning signs for AV Concept Holdings (of which 1 doesn't sit too well with us!) you should know about. Is AV Concept Holdings 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.