Accel Group Holdings' (HKG:1283) Dividend Is Being Reduced To HK$0.006

The board of Accel Group Holdings Limited (HKG:1283) has announced that the dividend on 10th of January will be reduced by 14% from last year's HK$0.007 to HK$0.006. This payment takes the dividend yield to 2.1%, which only provides a modest boost to overall returns.

View our latest analysis for Accel Group Holdings

Accel Group Holdings' Payment Could Potentially Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, Accel Group Holdings' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 13.0% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 36%, which is definitely feasible to continue.

Accel Group Holdings' Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. Since 2020, the annual payment back then was HK$0.032, compared to the most recent full-year payment of HK$0.02. The dividend has fallen 38% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Accel Group Holdings' earnings per share has shrunk at 13% a year over 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.

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. 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 would probably look elsewhere for an income investment.

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, Accel Group Holdings has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. Is Accel Group Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.