Stock Analysis

Winson Holdings Hong Kong (HKG:6812) Is Increasing Its Dividend To HK$0.0165

SEHK:6812
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Winson Holdings Hong Kong Limited (HKG:6812) will increase its dividend from last year's comparable payment on the 28th of August to HK$0.0165. This takes the dividend yield to 8.2%, which shareholders will be pleased with.

See our latest analysis for Winson Holdings Hong Kong

Winson Holdings Hong Kong's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Winson Holdings Hong Kong was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share could rise by 2.6% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 43% by next year, which is in a pretty sustainable range.

historic-dividend
SEHK:6812 Historic Dividend July 6th 2023

Winson Holdings Hong Kong's Dividend Has Lacked Consistency

Looking back, Winson Holdings Hong Kong's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The annual payment during the last 5 years was HK$0.0167 in 2018, and the most recent fiscal year payment was HK$0.0165. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Achieve

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. Earnings per share has been crawling upwards at 2.6% per year. Winson Holdings Hong Kong is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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 Winson Holdings Hong Kong that investors need to be conscious of moving forward. 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.