Stock Analysis

IWS Group Holdings (HKG:6663) Is Paying Out Less In Dividends Than Last Year

SEHK:6663
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IWS Group Holdings Limited's (HKG:6663) dividend is being reduced from last year's payment covering the same period to HK$0.015 on the 12th of October. Based on this payment, the dividend yield will be 3.9%, which is lower than the average for the industry.

Check out our latest analysis for IWS Group Holdings

IWS Group Holdings' Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. The last dividend was quite easily covered by IWS Group Holdings' 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 4.3% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 65% by next year, which is in a pretty sustainable range.

historic-dividend
SEHK:6663 Historic Dividend August 8th 2023

IWS Group Holdings' Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2020, the dividend has gone from HK$0.02 total annually to HK$0.015. The dividend has shrunk at around 9.1% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

IWS Group Holdings May Find It Hard To Grow The Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Earnings have grown at around 4.3% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 4.3% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

Even though the dividend was cut this year, we think IWS Group Holdings has the ability to make consistent payments in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. 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.

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 IWS Group Holdings that investors should know about before committing capital to this stock. 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.