Stock Analysis

Best Pacific International Holdings' (HKG:2111) Dividend Will Be Reduced To HK$0.0422

SEHK:2111
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Best Pacific International Holdings Limited (HKG:2111) is reducing its dividend from last year's comparable payment to HK$0.0422 on the 14th of August. The dividend yield of 9.9% is still a nice boost to shareholder returns, despite the cut.

Check out our latest analysis for Best Pacific International Holdings

Best Pacific International Holdings' Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Best Pacific International Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 117.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 20% by next year, which is in a pretty sustainable range.

historic-dividend
SEHK:2111 Historic Dividend April 18th 2023

Best Pacific International Holdings' Dividend Has Lacked Consistency

It's comforting to see that Best Pacific International Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2014, the dividend has gone from HK$0.07 total annually to HK$0.115. This implies that the company grew its distributions at a yearly rate of about 5.7% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Best Pacific International Holdings might have put its house in order since then, but we remain cautious.

Best Pacific International Holdings May Find It Hard To Grow The Dividend

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. Unfortunately, Best Pacific International Holdings' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Best Pacific International 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. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Best Pacific International Holdings is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Best Pacific International Holdings that investors should take into consideration. Is Best Pacific International Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.