Hong Kong Johnson Holdings' (HKG:1955) Dividend Will Be Reduced To HK$0.05

Hong Kong Johnson Holdings Co., Ltd.'s (HKG:1955) dividend is being reduced from last year's payment covering the same period to HK$0.05 on the 10th of October. The dividend yield will be in the average range for the industry at 4.8%.

See our latest analysis for Hong Kong Johnson Holdings

Hong Kong Johnson Holdings' Earnings Easily Cover the Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, Hong Kong Johnson Holdings' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 64.6% if recent trends continue. If the dividend continues on this path, the payout ratio could be 12% by next year, which we think can be pretty sustainable going forward.

Hong Kong Johnson Holdings Doesn't Have A Long Payment History

Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. It's encouraging to see that Hong Kong Johnson Holdings has been growing its earnings per share at 65% a year over the past three years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like Hong Kong Johnson Holdings' Dividend

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Hong Kong Johnson Holdings has the makings of a solid income stock moving forward. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Hong Kong Johnson Holdings that investors need to be conscious of moving forward. Is Hong Kong Johnson 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.