Crystal International Group (HKG:2232) Will Pay A Larger Dividend Than Last Year At HK$0.04

The board of Crystal International Group Limited (HKG:2232) has announced that it will be increasing its dividend on the 16th of September to HK$0.04. This will take the annual payment from 2.7% to 4.6% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Crystal International Group

Crystal International Group Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Crystal International Group's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 48.7%. If the dividend continues on its recent course, the payout ratio in 12 months could be 187%, which is a bit high and could start applying pressure to the balance sheet.

Crystal International Group's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The first annual payment during the last 3 years was US$0.016 in 2018, and the most recent fiscal year payment was US$0.011. The dividend has fallen 29% over that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Crystal International Group Could Grow Its Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Crystal International Group has impressed us by growing EPS at 5.1% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 3 warning signs for Crystal International Group that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.
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