Cabbeen Fashion (HKG:2030) Has Announced That Its Dividend Will Be Reduced To HK$0.034

Cabbeen Fashion Limited (HKG:2030) has announced it will be reducing its dividend payable on the 25th of April to HK$0.034. The dividend yield of 4.3% is still a nice boost to shareholder returns, despite the cut.

See our latest analysis for Cabbeen Fashion

Cabbeen Fashion's Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Cabbeen Fashion was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

EPS is set to fall by 0.8% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 46%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Cabbeen Fashion's Dividend Has Lacked Consistency

Cabbeen Fashion has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The first annual payment during the last 8 years was CN¥0.12 in 2014, and the most recent fiscal year payment was CN¥0.096. This works out to be a decline of approximately 2.2% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, Cabbeen Fashion's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Cabbeen Fashion's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Cabbeen Fashion you should be aware of, and 2 of them are potentially serious. 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.