Yau Lee Holdings (HKG:406) Has Affirmed Its Dividend Of HK$0.025

Yau Lee Holdings Limited (HKG:406) will pay a dividend of HK$0.025 on the 12th of January. The dividend yield is 4.3% based on this payment, which is a little bit low compared to the other companies in the industry.

See our latest analysis for Yau Lee Holdings

Yau Lee Holdings' Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Yau Lee Holdings' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS could expand by 8.0% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 34%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was HK$0.0276, compared to the most recent full-year payment of HK$0.05. This means that it has been growing its distributions at 6.1% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Has Growth Potential

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. Yau Lee Holdings has seen EPS rising for the last five years, at 8.0% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Yau Lee Holdings is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for Yau Lee Holdings (1 is a bit concerning!) that you should be aware of before investing. Is Yau Lee 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.