Chevalier International Holdings (HKG:25) Is Reducing Its Dividend To HK$0.28

Chevalier International Holdings Limited (HKG:25) is reducing its dividend from last year's comparable payment to HK$0.28 on the 20th of September. However, the dividend yield of 5.7% still remains in a typical range for the industry.

See our latest analysis for Chevalier International Holdings

Chevalier International Holdings' Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend was quite easily covered by Chevalier International Holdings' earnings. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to fall by 23.8% 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 60%, which is definitely feasible to continue.

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. Since 2013, the dividend has gone from HK$0.95 total annually to HK$0.38. This works out to be a decline of approximately 8.8% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Chevalier International Holdings' earnings per share has shrunk at 24% 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.

Our Thoughts On Chevalier International Holdings' Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Chevalier International Holdings has 3 warning signs (and 1 which is significant) we think you should know about. Is Chevalier International 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.