Yangtzekiang Garment (HKG:294) Has Affirmed Its Dividend Of HK$0.02

Yangtzekiang Garment Limited (HKG:294) has announced that it will pay a dividend of HK$0.02 per share on the 23rd of October. The dividend yield is 1.7% based on this payment, which is a little bit low compared to the other companies in the industry.

See our latest analysis for Yangtzekiang Garment

Yangtzekiang Garment Might Find It Hard To Continue The Dividend

If it is predictable over a long period, even low dividend yields can be attractive. While Yangtzekiang Garment is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Recent, EPS has fallen by 10.5%, so this could continue over the next year. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of HK$0.05 in 2014 to the most recent total annual payment of HK$0.02. This works out to be a decline of approximately 8.8% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Yangtzekiang Garment's EPS has fallen by approximately 11% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Yangtzekiang Garment's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Yangtzekiang Garment's payments, as there could be some issues with sustaining them into the future. 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 Yangtzekiang Garment 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Yangtzekiang Garment (1 is a bit concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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