Blue Moon Group Holdings Limited's (HKG:6993) investors are due to receive a payment of HK$0.06 per share on 23rd of June. Based on this payment, the dividend yield on the company's stock will be 3.2%, which is an attractive boost to shareholder returns.
Our free stock report includes 1 warning sign investors should be aware of before investing in Blue Moon Group Holdings. Read for free now.Blue Moon Group Holdings' Future Dividend Projections Seem Positive
A big dividend yield for a few years doesn't mean much if it can't be sustained. Even though Blue Moon Group Holdings isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.
According to analysts, EPS should be several times higher next year. If the dividend extends its recent trend, estimates say the dividend could reach 66%, which we would be comfortable to see continuing.
Check out our latest analysis for Blue Moon Group Holdings
Blue Moon Group Holdings' Dividend Has Lacked Consistency
The track record isn't the longest, but we are already seeing a bit of instability in the payments. The dividend has gone from an annual total of HK$0.069 in 2021 to the most recent total annual payment of HK$0.12. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
Dividend Growth Potential Is Shaky
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Blue Moon Group Holdings' EPS has declined at around 44% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.
Blue Moon Group Holdings' Dividend Doesn't Look Sustainable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Blue Moon Group Holdings' payments, as there could be some issues with sustaining them into the future. 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.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Blue Moon Group Holdings that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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