Allan International Holdings (HKG:684) Will Pay A Smaller Dividend Than Last Year

Allan International Holdings Limited's (HKG:684) dividend is being reduced from last year's payment covering the same period to HK$0.02 on the 20th of September. This payment takes the dividend yield to 2.9%, which only provides a modest boost to overall returns.

Check out our latest analysis for Allan International Holdings

Allan International Holdings' Distributions May Be Difficult To Sustain

Even a low dividend yield can be attractive if it is sustained for years on end. Even though Allan International Holdings is not generating a profit, it is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Over the next year, EPS might fall by 37.2% based on recent performance. 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 dividend has gone from an annual total of HK$0.175 in 2012 to the most recent total annual payment of HK$0.04. The dividend has fallen 77% over that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

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 37% over the last 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.

Allan International Holdings' Dividend Doesn't Look Great

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. 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 Allan International Holdings (of which 2 are a bit concerning!) 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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