Kingmaker Footwear Holdings' (HKG:1170) Upcoming Dividend Will Be Larger Than Last Year's
Kingmaker Footwear Holdings Limited (HKG:1170) has announced that it will be increasing its dividend from last year's comparable payment on the 7th of February to HK$0.023. This will take the dividend yield to an attractive 6.6%, providing a nice boost to shareholder returns.
Check out the opportunities and risks within the HK Luxury industry.
Kingmaker Footwear Holdings Doesn't Earn Enough To Cover Its Payments
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Kingmaker Footwear Holdings' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
If the company can't turn things around, EPS could fall by 37.9% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 118%, which is definitely a bit high to be sustainable going forward.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the annual payment back then was HK$0.045, compared to the most recent full-year payment of HK$0.061. This works out to be a compound annual growth rate (CAGR) of approximately 3.1% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
Dividend Growth Potential Is Shaky
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 38% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.
Kingmaker Footwear Holdings' Dividend Doesn't Look Sustainable
Overall, we always like to see the dividend being raised, but we don't think Kingmaker Footwear Holdings will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. 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. Just as an example, we've come across 4 warning signs for Kingmaker Footwear Holdings you should be aware of, and 1 of them doesn't sit too well with us. Is Kingmaker Footwear Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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About SEHK:1170
Kingmaker Footwear Holdings
An investment holding company, manufactures and sells footwear products in the United States, Europe, Asia, and internationally.
Flawless balance sheet second-rate dividend payer.