Carrianna Group Holdings Company Limited (HKG:126) will pay a dividend of HK$0.03 on the 8th of October. Based on this payment, the dividend yield on the company's stock will be 3.7%, which is an attractive boost to shareholder returns.
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. Investors will be pleased to see that Carrianna Group Holdings' stock price has increased by 46% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Carrianna Group Holdings' Dividend Is Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Carrianna Group Holdings' earnings. This means that a large portion of its earnings are being retained to grow the business.
Unless the company can turn things around, EPS could fall by 7.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 49%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2011, the dividend has gone from HK$0.02 to HK$0.03. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
Dividend Growth May Be Hard To Come By
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that Carrianna Group Holdings' earnings per share has fallen at approximately 7.8% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
The company has also been raising capital by issuing stock equal to 25% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.
Our Thoughts On Carrianna Group Holdings' Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Carrianna Group Holdings' payments, as there could be some issues with sustaining them into the future. 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 probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Carrianna Group Holdings has 6 warning signs (and 2 which are significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our curated list 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.
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