Eagle Nice (International) Holdings' (HKG:2368) Dividend Is Being Reduced To HK$0.04

Eagle Nice (International) Holdings Limited (HKG:2368) has announced that on 12th of September, it will be paying a dividend ofHK$0.04, which a reduction from last year's comparable dividend. However, the dividend yield of 7.2% is still a decent boost to shareholder returns.

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Eagle Nice (International) 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, Eagle Nice (International) Holdings was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, could fall by 2.1% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 76%, which is definitely on the higher side.

See our latest analysis for Eagle Nice (International) Holdings

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$0.12 in 2015, and the most recent fiscal year payment was HK$0.26. This implies that the company grew its distributions at a yearly rate of about 8.0% over that duration. 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. It's not great to see that Eagle Nice (International) Holdings' earnings per share has fallen at approximately 2.1% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Eagle Nice (International) Holdings' Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Eagle Nice (International) Holdings is a great stock to add to your portfolio if income is your focus.

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. Just as an example, we've come across 4 warning signs for Eagle Nice (International) Holdings you should be aware of, and 2 of them make us uncomfortable. If you are a dividend investor, you might also want to look at our curated list of high yield 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.