The board of International Housewares Retail Company Limited (HKG:1373) has announced that it will pay a dividend on the 24th of October, with investors receiving HK$0.056 per share. However, the dividend yield of 9.7% is still a decent boost to shareholder returns.
Check out our latest analysis for International Housewares Retail
International Housewares Retail's Dividend Is Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment made up 80% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.
Looking forward, could fall by 3.3% if the company can't turn things around from the last few years. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 91%, meaning that most of the company's earnings is being paid out to shareholders.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of HK$0.04 in 2014 to the most recent total annual payment of HK$0.112. This means that it has been growing its distributions at 11% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
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. In the last five years, International Housewares Retail's earnings per share has shrunk at approximately 3.3% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.
In Summary
Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for International Housewares Retail (of which 1 can't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.