The board of Sun Hing Printing Holdings Limited (HKG:1975) has announced that it will pay a dividend of HK$0.025 per share on the 20th of December. The yield is still above the industry average at 9.3%.
Check out our latest analysis for Sun Hing Printing Holdings
Sun Hing Printing Holdings' Projections Indicate Future Payments May Be Unsustainable
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 98% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only . Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.
EPS is set to fall by 11.9% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 122%, which could put the dividend in jeopardy if the company's earnings don't improve.
Sun Hing Printing Holdings' Dividend Has Lacked Consistency
It's comforting to see that Sun Hing Printing Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2018, the annual payment back then was HK$0.03, compared to the most recent full-year payment of HK$0.035. This means that it has been growing its distributions at 2.6% per annum 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 Has Limited Growth Potential
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Sun Hing Printing Holdings' earnings per share has shrunk at 12% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.
The Dividend Could Prove To Be Unreliable
In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. 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.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Sun Hing Printing Holdings that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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