The board of Pacific Millennium Packaging Group Corporation (HKG:1820) has announced that it will pay a dividend of CN¥0.08 per share on the 18th of July. This means the annual payment will be 1.6% of the current stock price, which is lower than the industry average.
Pacific Millennium Packaging Group Might Find It Hard To Continue The Dividend
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Pacific Millennium Packaging Group is unprofitable despite paying a dividend, and it is paying out 178% of its free cash flow. These payout levels would generally be quite difficult to keep up.
Looking forward, earnings per share could 47.3% over the next year if the trend of the last few years can't be broken. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.
Check out our latest analysis for Pacific Millennium Packaging Group
Pacific Millennium Packaging Group's Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 6 years was CN¥0.0878 in 2019, and the most recent fiscal year payment was CN¥0.0747. Doing the maths, this is a decline of about 2.7% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
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. Pacific Millennium Packaging Group's EPS has fallen by approximately 47% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.
Pacific Millennium Packaging Group's Dividend Doesn't Look Great
Overall, while some might be pleased that the dividend wasn't cut, we think this may help Pacific Millennium Packaging Group make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. We don't think that this is a great candidate to be an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Pacific Millennium Packaging Group that you should be aware of before investing. Is Pacific Millennium Packaging Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.