Perfect Group International Holdings (HKG:3326) Is Due To Pay A Dividend Of HK$0.02

The board of Perfect Group International Holdings Limited (HKG:3326) has announced that it will pay a dividend of HK$0.02 per share on the 19th of June. This means the annual payment is 9.8% of the current stock price, which is above the average for the industry.

See our latest analysis for Perfect Group International Holdings

Perfect Group International Holdings' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before this announcement, Perfect Group International Holdings was paying out 78% of earnings, but a comparatively small of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

EPS is set to fall by 8.9% over the next 12 months if recent trends continue. If recent patterns in the dividend continue, we could see the payout ratio reaching 89% in the next 12 months which is on the higher end of the range we would say is sustainable.

Perfect Group International Holdings' Dividend Has Lacked Consistency

Perfect Group International Holdings has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. There hasn't been much of a change in the dividend over the last 8 years. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Is Doubtful

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. Perfect Group International Holdings has seen earnings per share falling at 8.9% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Perfect Group International Holdings is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Perfect Group International Holdings you should be aware of, and 1 of them is significant. 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.