High Fashion International (HKG:608) Is Due To Pay A Dividend Of HK$0.035

The board of High Fashion International Limited (HKG:608) has announced that it will pay a dividend on the 3rd of October, with investors receiving HK$0.035 per share. This means the annual payment is 5.0% of the current stock price, which is above the average for the industry.

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High Fashion International's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, High Fashion International was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS could expand by 24.2% if recent trends continue. If the dividend continues on this path, the payout ratio could be 11% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for High Fashion International

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of HK$0.10 in 2015 to the most recent total annual payment of HK$0.07. The dividend has shrunk at around 3.5% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

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. High Fashion International has impressed us by growing EPS at 24% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 4 warning signs for High Fashion International you should be aware of, and 1 of them makes us a bit 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.