National Electronics Holdings (HKG:213) Has Announced A Dividend Of HK$0.012

The board of National Electronics Holdings Limited (HKG:213) has announced that it will pay a dividend of HK$0.012 per share on the 17th of September. The dividend yield is 2.0% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for National Electronics Holdings

National Electronics Holdings' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, National Electronics Holdings was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Unless the company can turn things around, EPS could fall by 27.0% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 35%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was HK$0.0545 in 2014, and the most recent fiscal year payment was HK$0.012. The dividend has fallen 78% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Over the past five years, it looks as though National Electronics Holdings' EPS has declined at around 27% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for National Electronics Holdings (of which 2 are a bit concerning!) you should know about. Is National Electronics Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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