IWS Group Holdings (HKG:6663) Has Announced That Its Dividend Will Be Reduced To HK$0.012

IWS Group Holdings Limited (HKG:6663) has announced that on 14th of October, it will be paying a dividend ofHK$0.012, which a reduction from last year's comparable dividend. Based on this payment, the dividend yield will be 5.2%, which is lower than the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. IWS Group Holdings' stock price has reduced by 34% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

View our latest analysis for IWS Group Holdings

IWS Group Holdings' Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. The last payment made up 70% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Looking forward, could fall by 10.4% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 79%, which is definitely on the higher side.

IWS Group Holdings' Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2020, the dividend has gone from HK$0.02 total annually to HK$0.012. Dividend payments have fallen sharply, down 40% 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 Potential Is Shaky

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. IWS Group Holdings' EPS has fallen by approximately 10% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 4 warning signs for IWS Group Holdings (1 shouldn't be ignored!) 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.

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