Chow Sang Sang Holdings International (HKG:116) Is Paying Out Less In Dividends Than Last Year

Chow Sang Sang Holdings International Limited (HKG:116) has announced that on 21st of June, it will be paying a dividend ofHK$0.15, which a reduction from last year's comparable dividend. This means the annual payment is 3.4% of the current stock price, which is above the average for the industry.

See our latest analysis for Chow Sang Sang Holdings International

Chow Sang Sang Holdings International's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Chow Sang Sang Holdings International's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, earnings per share is forecast to rise by 198.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 13%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of HK$0.55 in 2013 to the most recent total annual payment of HK$0.30. Doing the maths, this is a decline of about 5.9% per year. 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. Chow Sang Sang Holdings International's earnings per share has shrunk at 11% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Chow Sang Sang Holdings International's Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While Chow Sang Sang Holdings International is earning enough to cover the payments, the cash flows are lacking. We don't think Chow Sang Sang Holdings International is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Chow Sang Sang Holdings International that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.