Watts International Maritime (HKG:2258) Is Paying Out A Larger Dividend Than Last Year

The board of Watts International Maritime Company Limited (HKG:2258) has announced that the dividend on 16th of August will be increased to HK$0.016, which will be 100% higher than last year. This takes the annual payment to 4.7% of the current stock price, which is about average for the industry.

Check out our latest analysis for Watts International Maritime

Watts International Maritime's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Watts International Maritime was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the company can't turn things around, EPS could fall by 34.6% over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 86% in the next 12 months which is on the higher end of the range we would say is sustainable.

Watts International Maritime's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. The first annual payment during the last 3 years was CN¥0.022 in 2019, and the most recent fiscal year payment was CN¥0.013. Dividend payments have fallen sharply, down 40% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Over the past three years, it looks as though Watts International Maritime's EPS has declined at around 35% a year. 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.

Our Thoughts On Watts International Maritime's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Watts International Maritime's payments are rock solid. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Watts International Maritime (of which 1 doesn't sit too well with us!) 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.