Health and Happiness (H&H) International Holdings Limited's (HKG:1112) dividend is being reduced from last year's payment covering the same period to CN¥0.05 on the 9th of July. This means that the annual payment is 3.8% of the current stock price, which is lower than what the rest of the industry is paying.
Health and Happiness (H&H) International Holdings' Projections Indicate Future Payments May Be Unsustainable
Estimates Indicate Health and Happiness (H&H) International Holdings' Could Struggle to Maintain Dividend Payments In The Future
Health and Happiness (H&H) International Holdings' Future Dividends May Potentially Be At Risk
Even a low dividend yield can be attractive if it is sustained for years on end. While Health and Happiness (H&H) International Holdings is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. This gives us some comfort about the level of the dividend payments.
EPS is forecast to rise very quickly over the next 12 months. Assuming the dividend continues along recent trends, we could see the payout ratio reach 236%, which is on the unsustainable side.
Check out our latest analysis for Health and Happiness (H&H) 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 CN¥0.535 in 2015 to the most recent total annual payment of CN¥0.324. The dividend has shrunk at around 4.9% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.
Dividend Growth Potential Is Shaky
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Health and Happiness (H&H) International Holdings' EPS has fallen by approximately 27% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
The Dividend Could Prove To Be Unreliable
Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Health and Happiness (H&H) International Holdings is a great stock to add to your portfolio if income is your focus.
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. Just as an example, we've come across 2 warning signs for Health and Happiness (H&H) International Holdings you should be aware of, and 1 of them is a bit unpleasant. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.