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

The board of Yangtzekiang Garment Limited (HKG:294) has announced that it will pay a dividend on the 23rd of October, with investors receiving HK$0.02 per share. This means the annual payment will be 2.0% of the current stock price, which is lower than the industry average.

View 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. Despite not generating a profit, Yangtzekiang Garment is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Looking forward, earnings per share could 10.5% over the next year if the trend of the last few years can't be broken. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

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$0.03 in 2014, and the most recent fiscal year payment was HK$0.02. The dividend has shrunk at around 4.0% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Yangtzekiang Garment's earnings per share has shrunk at 11% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Yangtzekiang Garment's Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Yangtzekiang Garment make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. We don't think that this is a great candidate to be an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Yangtzekiang Garment (of which 1 can't be ignored!) you should know about. 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.