The board of San Miguel Brewery Hong Kong Limited (HKG:236) has announced that it will pay a dividend on the 15th of May, with investors receiving HK$0.05 per share. The dividend yield will be 6.5% based on this payment which is still above the industry average.
San Miguel Brewery Hong Kong Might Find It Hard To Continue The Dividend
A big dividend yield for a few years doesn't mean much if it can't be sustained. San Miguel Brewery Hong Kong is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.
Over the next year, EPS could expand by 25.4% if recent trends continue. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. However, the positive cash flow ratio gives us some comfort about the sustainability of the dividend.
See our latest analysis for San Miguel Brewery Hong Kong
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was HK$0.02, compared to the most recent full-year payment of HK$0.05. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
The Company Could Face Some Challenges Growing The Dividend
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. San Miguel Brewery Hong Kong has impressed us by growing EPS at 25% per year over the past five years. The company hasn't been turning a profit, but it running in the right direction. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.
Our Thoughts On San Miguel Brewery Hong Kong's Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for San Miguel Brewery Hong Kong that you should be aware of before investing. 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.