Truly International Holdings Limited's (HKG:732) investors are due to receive a payment of HK$0.05 per share on 30th of May. This means the annual payment is 9.9% of the current stock price, which is above the average for the industry.
Truly International Holdings' Future Dividends May Potentially Be At Risk
A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Truly International Holdings' profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.
EPS is set to fall by 10.8% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 113%, which is definitely a bit high to be sustainable going forward.
Check out our latest analysis for Truly 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 HK$0.15 in 2015 to the most recent total annual payment of HK$0.10. Doing the maths, this is a decline of about 4.0% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend Has Limited Growth Potential
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been sinking by 11% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.
Truly International 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 Truly International 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 probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Truly International Holdings has 4 warning signs (and 2 which make us uncomfortable) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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