Sun Hing Printing Holdings' (HKG:1975) Dividend Will Be Reduced To HK$0.043

Sun Hing Printing Holdings Limited (HKG:1975) has announced that on 20th of December, it will be paying a dividend ofHK$0.043, which a reduction from last year's comparable dividend. However, the dividend yield of 8.3% still remains in a typical range for the industry.

Check out our latest analysis for Sun Hing Printing Holdings

Sun Hing Printing Holdings' Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Sun Hing Printing Holdings' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS could expand by 50.7% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 32% by next year, which is in a pretty sustainable range.

Sun Hing Printing Holdings' Dividend Has Lacked Consistency

It's comforting to see that Sun Hing Printing Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of HK$0.03 in 2018 to the most recent total annual payment of HK$0.065. This means that it has been growing its distributions at 17% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

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. Sun Hing Printing Holdings has impressed us by growing EPS at 51% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Sun Hing Printing Holdings could prove to be a strong dividend payer.

We Really Like Sun Hing Printing 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 Sun Hing Printing Holdings has the makings of a solid income stock moving forward. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Sun Hing Printing Holdings that investors need to be conscious of moving forward. Is Sun Hing Printing Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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