Herald Holdings (HKG:114) Is Due To Pay A Dividend Of HK$0.03

Herald Holdings Limited (HKG:114) has announced that it will pay a dividend of HK$0.03 per share on the 15th of January. This means the annual payment is 9.4% of the current stock price, which is above the average for the industry.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Herald Holdings' Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, Herald Holdings was paying out 73% of earnings, but a comparatively small 50% of free cash flows. This leaves plenty of cash for reinvestment into the business.

If the trend of the last few years continues, EPS will grow by 2.6% over the next 12 months. If the dividend continues on this path, the payout ratio could be 69% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Herald Holdings

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was HK$0.07 in 2015, and the most recent fiscal year payment was HK$0.06. This works out to be a decline of approximately 1.5% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Herald Holdings May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings have grown at around 2.6% a year for the past five years, which isn't massive but still better than seeing them shrink. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

In Summary

Overall, a consistent dividend is a good thing, and we think that Herald Holdings has the ability to continue this into the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. As an example, we've identified 2 warning signs for Herald Holdings that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.