Million Hope Industries Holdings (HKG:1897) Has Announced That Its Dividend Will Be Reduced To HK$0.008

Million Hope Industries Holdings Limited (HKG:1897) has announced that on 14th of December, it will be paying a dividend ofHK$0.008, which a reduction from last year's comparable dividend. The dividend yield of 7.1% is still a nice boost to shareholder returns, despite the cut.

Our analysis indicates that 1897 is potentially overvalued!

Million Hope Industries Holdings Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the dividend made up 258% of earnings, and the company was generating negative free cash flows. This high of a dividend payment could start to put pressure on the balance sheet in the future.

If the company can't turn things around, EPS could fall by 50.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 554%, which could put the dividend in jeopardy if the company's earnings don't improve.

Million Hope Industries Holdings' Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The dividend has gone from an annual total of HK$0.02 in 2019 to the most recent total annual payment of HK$0.029. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Potential Is Shaky

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. Million Hope Industries Holdings' EPS has fallen by approximately 50% per year during the past three years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Million Hope Industries Holdings' Dividend Doesn't Look Great

In summary, it's not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Million Hope Industries Holdings has 5 warning signs (and 2 which are significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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