The board of Transport International Holdings Limited (HKG:62) has announced that it will pay a dividend of HK$0.50 per share on the 26th of June. Based on this payment, the dividend yield will be 5.9%, which is fairly typical for the industry.
Estimates Indicate Transport International Holdings' Could Struggle to Maintain Dividend Payments In The Future
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, the company was paying out 134% of what it was earning and 75% 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.
If the company can't turn things around, EPS could fall by 23.2% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 165%, which is definitely a bit high to be sustainable going forward.
Check out our latest analysis for Transport International Holdings
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of HK$0.60 in 2015 to the most recent total annual payment of HK$0.50. Doing the maths, this is a decline of about 1.8% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Has Limited Growth Potential
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Transport International Holdings' EPS has fallen by approximately 23% per year during 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
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 are bit high to be considered sustainable, and the track record isn't the best. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 4 warning signs for Transport International Holdings you should be aware of, and 1 of them can't be ignored. Is Transport International 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.