Stock Analysis

Kingmaker Footwear Holdings' (HKG:1170) Upcoming Dividend Will Be Larger Than Last Year's

SEHK:1170
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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.

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SEHK:1170 Historic Dividend December 5th 2022

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.

Valuation is complex, but we're here to simplify it.

Discover if Kingmaker Footwear Holdings might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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.