Public Financial Holdings (HKG:626) Has Announced That Its Dividend Will Be Reduced To HK$0.03

Public Financial Holdings Limited's (HKG:626) dividend is being reduced by 40% to HK$0.03 per share on 2nd of August, in comparison to last year's comparable payment of HK$0.05. Despite the cut, the dividend yield of 7.7% will still be comparable to other companies in the industry.

See our latest analysis for Public Financial Holdings

Public Financial Holdings' Dividend Forecasted To Be Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Having distributed dividends for at least 10 years, Public Financial Holdings has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Public Financial Holdings' payout ratio of 53% is a good sign as this means that earnings decently cover dividends.

Unless the company can turn things around, EPS could fall by 8.2% over the next year. Assuming the dividend continues along recent trends, we believe the future payout ratio could be 52%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of HK$0.14 in 2013 to the most recent total annual payment of HK$0.16. This works out to be a compound annual growth rate (CAGR) of approximately 1.3% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that Public Financial Holdings' earnings per share has fallen at approximately 8.2% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While Public Financial Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Public Financial Holdings is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Public Financial Holdings has 2 warning signs (and 1 which can't be ignored) we think you should know about. 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.