Sun Hing Printing Holdings Limited's (HKG:1975) investors are due to receive a payment of HK$0.01 per share on 26th of March. This makes the dividend yield 9.3%, which will augment investor returns quite nicely.
View our latest analysis for Sun Hing Printing Holdings
Estimates Indicate Sun Hing Printing Holdings' Could Struggle to Maintain Dividend Payments In The Future
A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Sun Hing Printing Holdings' dividend was higher than its profits, but the free cash flows quite comfortably covered it. 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.
Looking forward, EPS could fall by 19.1% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 154%, which could put the dividend in jeopardy if the company's earnings don't improve.
Sun Hing Printing Holdings' Dividend Has Lacked Consistency
Looking back, Sun Hing Printing Holdings' dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of HK$0.03 in 2019 to the most recent total annual payment of HK$0.035. This means that it has been growing its distributions at 2.6% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
The Dividend Has Limited Growth Potential
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings per share has been sinking by 19% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.
The Dividend Could Prove To Be Unreliable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Sun Hing Printing Holdings (1 can't be ignored!) that you should be aware of before investing. Is Sun Hing Printing 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.