Wai Kee Holdings (HKG:610) Has Announced That Its Dividend Will Be Reduced To HK$0.11

Wai Kee Holdings Limited (HKG:610) is reducing its dividend to HK$0.11 on the 15th of June. The dividend yield will be in the average range for the industry at 5.2%.

See our latest analysis for Wai Kee Holdings

Wai Kee Holdings' Earnings Easily Cover the Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, Wai Kee Holdings' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 0.2% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 2012, the dividend has gone from HK$0.11 to HK$0.18. This works out to be a compound annual growth rate (CAGR) of approximately 5.0% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Wai Kee Holdings May Find It Hard To Grow The Dividend

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. Unfortunately, Wai Kee Holdings' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. If Wai Kee Holdings is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Wai Kee Holdings' Dividend

Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 2 warning signs for Wai Kee 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.