Leeport (Holdings) (HKG:387) Will Pay A Larger Dividend Than Last Year At HK$0.035

Leeport (Holdings) Limited's (HKG:387) dividend will be increasing from last year's payment of the same period to HK$0.035 on 15th of July. Even though the dividend went up, the yield is still quite low at only 5.5%.

Check out our latest analysis for Leeport (Holdings)

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

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before this announcement, Leeport (Holdings) was paying out 92% of earnings, but a comparatively small of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, EPS could fall by 10.1% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 97%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was HK$0.015, compared to the most recent full-year payment of HK$0.045. This means that it has been growing its distributions at 12% per annum over that time. 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.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Leeport (Holdings)'s earnings per share has shrunk at 10% 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 Leeport (Holdings)'s Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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. Overall, we don't think this company has the makings of a good income stock.

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. As an example, we've identified 3 warning signs for Leeport (Holdings) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.