The board of Raymond Industrial Limited (HKG:229) has announced that it will pay a dividend of HK$0.08 per share on the 9th of June. The dividend yield of 8.7% is still a nice boost to shareholder returns, despite the cut.
Raymond Industrial's Projections Indicate Future Payments May Be Unsustainable
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Raymond Industrial's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Over the next year, EPS could expand by 2.7% if the company continues along the path it has been on recently. If the dividend continues on its recent course, the payout ratio in 12 months could be 132%, which is a bit high and could start applying pressure to the balance sheet.
View our latest analysis for Raymond Industrial
Raymond Industrial Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was HK$0.06 in 2015, and the most recent fiscal year payment was HK$0.08. This means that it has been growing its distributions at 2.9% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
Raymond Industrial May Find It Hard To Grow The Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings have grown at around 2.7% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 2.7% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This could mean the dividend doesn't have the growth potential we look for going into the future.
We Really Like Raymond Industrial's Dividend
Overall, we think that Raymond Industrial could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. Taking this all into consideration, this looks like it could be a good dividend opportunity.
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 1 warning sign for Raymond Industrial that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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.