Leeport (Holdings) (HKG:387) Has Announced That It Will Be Increasing Its Dividend To HK$0.035

Leeport (Holdings) Limited (HKG:387) will increase its dividend from last year's comparable payment on the 15th of July to HK$0.035. This takes the annual payment to 7.1% of the current stock price, which is about average for the industry.

Check out our latest analysis for Leeport (Holdings)

Leeport (Holdings) Doesn't Earn Enough To Cover Its Payments

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Leeport (Holdings)'s dividend made up quite a large proportion of earnings but only of free cash flows. This leaves plenty of cash for reinvestment into the business.

If the company can't turn things around, EPS could fall by 10.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 97%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from HK$0.035 total annually to HK$0.045. This means that it has been growing its distributions at 2.5% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though Leeport (Holdings)'s EPS has declined at around 10% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Our Thoughts On Leeport (Holdings)'s Dividend

In summary, while it's always good to see the dividend being raised, we don't think Leeport (Holdings)'s payments are rock solid. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 3 warning signs for Leeport (Holdings) that investors need to be conscious of moving forward. 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.