Q P Group Holdings (HKG:1412) Has Announced That Its Dividend Will Be Reduced To HK$0.02

The board of Q P Group Holdings Limited (HKG:1412) has announced that the dividend on 9th of October will be reduced by 33% from last year's HK$0.03 to HK$0.02. This means the annual payment is 8.8% of the current stock price, which is above the average for the industry.

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Q P Group Holdings' Payment Could Potentially Have 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, Q P Group Holdings was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 0.8% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 61%, which is definitely feasible to continue.

Check out our latest analysis for Q P Group Holdings

Q P Group Holdings' Dividend Has Lacked Consistency

Q P Group Holdings has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2020, the annual payment back then was HK$0.09, compared to the most recent full-year payment of HK$0.14. This works out to be a compound annual growth rate (CAGR) of approximately 9.2% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Q P Group Holdings hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Q P Group Holdings' Dividend

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. 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.

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. To that end, Q P Group Holdings has 2 warning signs (and 1 which is a bit concerning) we think you should know about. 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.