Luks Group (Vietnam Holdings) Company Limited (HKG:366) has announced that it will pay a dividend of HK$0.02 per share on the 10th of October. This means the annual payment will be 5.1% of the current stock price, which is lower than the industry average.
View our latest analysis for Luks Group (Vietnam Holdings)
Luks Group (Vietnam Holdings)'s Distributions May Be Difficult To Sustain
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Even though Luks Group (Vietnam Holdings) isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.
EPS has fallen by an average of 48.4% in the past, so this could continue over the next year. This means that the company will be unprofitable, but cash flows are more important when considering the dividend and as the current cash payout ratio is pretty healthy, we don't think there is too much reason to worry.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from HK$0.10 total annually to HK$0.04. The dividend has shrunk at around 8.8% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend Has Limited Growth Potential
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Over the past five years, it looks as though Luks Group (Vietnam Holdings)'s EPS has declined at around 48% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.
The Dividend Could Prove To Be Unreliable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Luks Group (Vietnam Holdings)'s payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.
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. Just as an example, we've come across 3 warning signs for Luks Group (Vietnam Holdings) you should be aware of, and 1 of them is a bit unpleasant. Is Luks Group (Vietnam 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.