Sino-Ocean Service Holding (HKG:6677) Will Pay A Smaller Dividend Than Last Year

Sino-Ocean Service Holding Limited's (HKG:6677) dividend is being reduced from last year's payment covering the same period to CN¥0.0159 on the 18th of June. This payment takes the dividend yield to 3.0%, which only provides a modest boost to overall returns.

View our latest analysis for Sino-Ocean Service Holding

Sino-Ocean Service Holding's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Sino-Ocean Service Holding's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 12%, so there isn't too much pressure on the dividend.

Sino-Ocean Service Holding's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2021, the dividend has gone from CN¥0.055 total annually to CN¥0.0144. This works out to a decline of approximately 74% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Sino-Ocean Service Holding's EPS has fallen by approximately 27% 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. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While Sino-Ocean Service Holding is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 2 warning signs for Sino-Ocean Service Holding that investors need to be conscious of moving forward. 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.