SITC International Holdings Company Limited (HKG:1308) will increase its dividend from last year's comparable payment on the 22nd of May to $1.40. Although the dividend is now higher, the yield is only 9.8%, which is below the industry average.
Our free stock report includes 3 warning signs investors should be aware of before investing in SITC International Holdings. Read for free now.Estimates Indicate SITC International Holdings' Could Struggle to Maintain Dividend Payments In The Future
Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, SITC International Holdings was paying out 70% of earnings and more than 75% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.
EPS is set to fall by 25.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach over 200%, which could put the dividend in jeopardy if the company's earnings don't improve.
Check out our latest analysis for SITC International Holdings
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $0.0284 in 2015 to the most recent total annual payment of $0.272. This works out to be a compound annual growth rate (CAGR) of approximately 25% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
The Dividend Looks Likely To Grow
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. We are encouraged to see that SITC International Holdings has grown earnings per share at 36% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which SITC International Holdings hasn't been doing.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think SITC International Holdings' payments are rock solid. While SITC International Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think SITC International Holdings is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, SITC International Holdings has 3 warning signs (and 1 which is concerning) we think you should know about. 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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