Stock Analysis

Winson Holdings Hong Kong (HKG:6812) Is Paying Out A Larger Dividend Than Last Year

SEHK:6812
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Winson Holdings Hong Kong Limited's (HKG:6812) dividend will be increasing from last year's payment of the same period to HK$0.0165 on 28th of August. This will take the dividend yield to an attractive 8.3%, providing a nice boost to shareholder returns.

View our latest analysis for Winson Holdings Hong Kong

Winson Holdings Hong Kong's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Winson Holdings Hong Kong's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

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.

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SEHK:6812 Historic Dividend June 22nd 2023

Winson Holdings Hong Kong's Dividend Has Lacked Consistency

Looking back, Winson Holdings Hong Kong's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. 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. Payments have been decreasing at a very slow pace in this time period. 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 May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings has been rising at 2.6% per annum over the last five years, which admittedly is a bit slow. Winson Holdings Hong Kong is struggling to find viable investments, so it is returning more to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. 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.

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. For instance, we've picked out 2 warning signs for Winson Holdings Hong Kong that investors should take into consideration. 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.