Stock Analysis

Winson Holdings Hong Kong (HKG:6812) Has Announced That Its Dividend Will Be Reduced To HK$0.015

SEHK:6812
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Winson Holdings Hong Kong Limited (HKG:6812) is reducing its dividend to HK$0.015 on the 26th of August. This means that the annual payment is 3.5% of the current stock price, which is lower than what the rest of the industry is paying.

View our latest analysis for Winson Holdings Hong Kong

Winson Holdings Hong Kong's Payment Has Solid Earnings Coverage

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

If the trend of the last few years continues, EPS will grow by 14.1% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 47%, which is in the range that makes us comfortable with the sustainability of the dividend.

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SEHK:6812 Historic Dividend July 1st 2022

Winson Holdings Hong Kong's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The first annual payment during the last 4 years was HK$0.017 in 2018, and the most recent fiscal year payment was HK$0.015. The dividend has shrunk at around 3.1% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

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. It's encouraging to see Winson Holdings Hong Kong has been growing its earnings per share at 14% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Winson Holdings Hong Kong's prospects of growing its dividend payments in the future.

We Really Like Winson Holdings Hong Kong's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Winson Holdings Hong Kong does. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for Winson Holdings Hong Kong that you should be aware of before investing. Is Winson Holdings Hong Kong not quite the opportunity you were looking for? Why not check out our selection of top 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.