Best Mart 360 Holdings (HKG:2360) Is Due To Pay A Dividend Of HK$0.11

Best Mart 360 Holdings Limited's (HKG:2360) investors are due to receive a payment of HK$0.11 per share on 26th of September. This means the annual payment is 9.9% of the current stock price, which is above the average for the industry.

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Best Mart 360 Holdings' Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Best Mart 360 Holdings' dividend made up quite a large proportion of earnings but only 52% 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.

Over the next year, EPS could expand by 60.4% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 70%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

See our latest analysis for Best Mart 360 Holdings

Best Mart 360 Holdings' Dividend Has Lacked Consistency

Best Mart 360 Holdings has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2019, the annual payment back then was HK$0.06, compared to the most recent full-year payment of HK$0.21. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Best Mart 360 Holdings Might Find It Hard To Grow Its Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Best Mart 360 Holdings has been growing its earnings per share at 60% a year over the past five years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Best Mart 360 Holdings is not retaining those earnings to reinvest in growth.

Our Thoughts On Best Mart 360 Holdings' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Best Mart 360 Holdings 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.