Stock Analysis

Fujikon Industrial Holdings' (HKG:927) Dividend Will Be HK$0.03

SEHK:927
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Fujikon Industrial Holdings Limited (HKG:927) has announced that it will pay a dividend of HK$0.03 per share on the 2nd of September. The dividend yield will be 6.7% based on this payment which is still above the industry average.

See our latest analysis for Fujikon Industrial Holdings

Fujikon Industrial Holdings' Distributions May Be Difficult To Sustain

If the payments aren't sustainable, a high yield for a few years won't matter that much. While Fujikon Industrial Holdings is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into 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.

Over the next year, EPS might fall by 42.7% based on recent performance. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

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SEHK:927 Historic Dividend July 13th 2022

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$0.08 in 2012 to the most recent total annual payment of HK$0.05. Doing the maths, this is a decline of about 4.6% per year. 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 43% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Fujikon Industrial Holdings' Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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 would be a touch cautious of relying on this stock primarily for the dividend income.

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. For example, we've identified 3 warning signs for Fujikon Industrial Holdings (1 can't be ignored!) that you should be aware of before investing. 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.