Pacific Millennium Packaging Group Corporation's (HKG:1820) investors are due to receive a payment of CN¥0.08 per share on 16th of December. This payment means the dividend yield will be 2.5%, which is below the average for the industry.
View our latest analysis for Pacific Millennium Packaging Group
Pacific Millennium Packaging Group Doesn't Earn Enough To Cover Its Payments
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, the company was paying out 643% of what it was earning and 89% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.
Looking forward, EPS could fall by 47.0% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 1,897%, which could put the dividend under pressure if earnings don't start to improve.
Pacific Millennium Packaging Group's Dividend Has Lacked Consistency
Looking back, Pacific Millennium Packaging Group's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2019, the annual payment back then was CN¥0.0878, compared to the most recent full-year payment of CN¥0.146. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year 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.
The Dividend Has Limited Growth Potential
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Pacific Millennium Packaging Group's earnings per share has shrunk at 47% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.
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 Pacific Millennium Packaging Group's payments, as there could be some issues with sustaining them into the future. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Pacific Millennium Packaging Group has 3 warning signs (and 2 which are potentially serious) we think you should know about. Is Pacific Millennium Packaging Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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