Clifford Modern Living Holdings Limited's (HKG:3686) investors are due to receive a payment of CN¥0.045 per share on 31st of July. The payment will take the dividend yield to 8.2%, which is in line with the average for the industry.
Estimates Indicate Clifford Modern Living 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. The last dividend was quite easily covered by Clifford Modern Living Holdings' earnings. This means that a large portion of its earnings are being retained to grow the business.
EPS is set to grow by 0.5% over the next year if recent trends continue. If the dividend continues on its recent course, the payout ratio in 12 months could be 178%, which is a bit high and could start applying pressure to the balance sheet.
Check out our latest analysis for Clifford Modern Living Holdings
Clifford Modern Living Holdings Is Still Building Its Track Record
Clifford Modern Living Holdings' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2019, the annual payment back then was CN¥0.0188, compared to the most recent full-year payment of CN¥0.039. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
The Dividend's Growth Prospects Are Limited
Investors could be attracted to the stock based on the quality of its payment history. Although it's important to note that Clifford Modern Living Holdings' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Growth of 0.5% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
Our Thoughts On Clifford Modern Living Holdings' Dividend
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Clifford Modern Living Holdings (1 is a bit unpleasant!) that you should be aware of before investing. 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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