Health and Happiness (H&H) International Holdings Limited (HKG:1112) is reducing its dividend from last year's comparable payment to CN¥0.05 on the 9th of July. This means that the annual payment is 3.6% of the current stock price, which is lower than what the rest of the industry is paying.
Health and Happiness (H&H) International Holdings' Projections Indicate Future Payments May Be Unsustainable
Estimates Indicate Health and Happiness (H&H) International Holdings' Could Struggle to Maintain Dividend Payments In The Future
Health and Happiness (H&H) International Holdings' Future Dividends May Potentially Be At Risk
If it is predictable over a long period, even low dividend yields can be attractive. While Health and Happiness (H&H) International Holdings is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into 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 is forecast to grow rapidly. If the dividend continues along recent trends, we estimate the payout ratio could reach 220%, which is unsustainable.
View our latest analysis for Health and Happiness (H&H) International Holdings
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from CN¥0.953 total annually to CN¥0.327. The dividend has fallen 66% over that period. 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, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Health and Happiness (H&H) International Holdings' earnings per share has shrunk at 27% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
Health and Happiness (H&H) International Holdings' Dividend Doesn't Look Sustainable
In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. 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. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Health and Happiness (H&H) International Holdings you should be aware of, and 1 of them is potentially serious. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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