Sitoy Group Holdings (HKG:1023) Has Affirmed Its Dividend Of HK$0.02

The board of Sitoy Group Holdings Limited (HKG:1023) has announced that it will pay a dividend on the 29th of April, with investors receiving HK$0.02 per share. This means the annual payment is 5.9% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Sitoy Group Holdings

Sitoy Group Holdings Might Find It Hard To Continue The Dividend

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Sitoy Group Holdings' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS might fall by 59.2% based on recent performance. While this means that the company will be unprofitable, we generally believe cash flows are more important, and the current cash payout ratio is quite healthy, which gives us comfort.

Sitoy Group Holdings' Dividend Has Lacked Consistency

Sitoy Group Holdings has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The first annual payment during the last 9 years was HK$0.20 in 2013, and the most recent fiscal year payment was HK$0.03. This works out to a decline of approximately 85% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Over the past five years, it looks as though Sitoy Group Holdings' EPS has declined at around 59% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

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. For example, we've identified 3 warning signs for Sitoy Group Holdings (1 doesn't sit too well with us!) that you should be aware of before investing. Is Sitoy Group Holdings 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.