EEKA Fashion Holdings Limited (HKG:3709) is reducing its dividend from last year's comparable payment to CN¥0.38 on the 30th of June. Despite the cut, the dividend yield of 5.3% will still be comparable to other companies in the industry.
EEKA Fashion Holdings' Future Dividend Projections Appear Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, EEKA Fashion Holdings was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 14.9% over the next year. If the dividend continues on this path, the payout ratio could be 56% by next year, which we think can be pretty sustainable going forward.
Check out our latest analysis for EEKA Fashion Holdings
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was CN¥0.0799 in 2015, and the most recent fiscal year payment was CN¥0.357. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
EEKA Fashion Holdings May Find It Hard To Grow The Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, EEKA Fashion Holdings' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
Our Thoughts On EEKA Fashion Holdings' Dividend
Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for EEKA Fashion Holdings that investors should know about before committing capital to this stock. Is EEKA Fashion Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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