King's Flair International (Holdings)'s (HKG:6822) Dividend Will Be Reduced To HK$0.02

King's Flair International (Holdings) Limited (HKG:6822) is reducing its dividend from last year's comparable payment to HK$0.02 on the 5th of July. Despite the cut, the dividend yield of 4.4% will still be comparable to other companies in the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. King's Flair International (Holdings)'s stock price has reduced by 36% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

See our latest analysis for King's Flair International (Holdings)

King's Flair International (Holdings) Might Find It Hard To Continue The Dividend

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. King's Flair International (Holdings) is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Looking forward, earnings per share could 32.0% over the next year if the trend of the last few years can't be broken. 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.

King's Flair International (Holdings)'s Dividend Has Lacked Consistency

Looking back, King's Flair International (Holdings)'s dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2015, the annual payment back then was HK$0.09, compared to the most recent full-year payment of HK$0.02. The dividend has fallen 78% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Earnings per share has been sinking by 32% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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 King's Flair International (Holdings) 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for King's Flair International (Holdings) (1 makes us a bit uncomfortable!) 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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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.