Hong Kong Johnson Holdings (HKG:1955) Has Announced That Its Dividend Will Be Reduced To HK$0.0122

Hong Kong Johnson Holdings Co., Ltd.'s (HKG:1955) dividend is being reduced from last year's payment covering the same period to HK$0.0122 on the 10th of October. Based on this payment, the dividend yield will be 2.3%, which is lower than the average for the industry.

Check out our latest analysis for Hong Kong Johnson Holdings

Hong Kong Johnson Holdings' Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Hong Kong Johnson Holdings was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Unless the company can turn things around, EPS could fall by 2.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 20%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Hong Kong Johnson Holdings' Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The annual payment during the last 2 years was HK$0.075 in 2021, and the most recent fiscal year payment was HK$0.0122. This works out to a decline of approximately 84% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Achieve

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Hong Kong Johnson Holdings has seen earnings per share falling at 2.4% per year over the last three years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. 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 be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 3 warning signs for Hong Kong Johnson Holdings that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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