Yangtzekiang Garment Limited (HKG:294) will pay a dividend of HK$0.02 on the 23rd of October. Including this payment, the dividend yield on the stock will be 1.9%, which is a modest boost for shareholders' returns.
View our latest analysis for Yangtzekiang Garment
Yangtzekiang Garment Might Find It Hard To Continue The Dividend
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Even in the absence of profits, Yangtzekiang Garment is paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.
Recent, EPS has fallen by 10.5%, so this could continue over the next year. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was HK$0.03, compared to the most recent full-year payment of HK$0.02. The dividend has shrunk at around 4.0% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend Has Limited Growth Potential
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though Yangtzekiang Garment's EPS has declined at around 11% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.
We're Not Big Fans Of Yangtzekiang Garment's Dividend
In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. 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. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.
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. To that end, Yangtzekiang Garment has 3 warning signs (and 1 which can't be ignored) we think 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.
About SEHK:294
Yangtzekiang Garment
Engages in the manufacture and sale of garment and textile products.
Flawless balance sheet very low.
