EC Healthcare's (HKG:2138) Dividend Will Be Reduced To HK$0.042

EC Healthcare (HKG:2138) has announced that on 20th of September, it will be paying a dividend ofHK$0.042, which a reduction from last year's comparable dividend. This means that the dividend yield is 2.1%, which is a bit low when comparing to other companies in the industry.

Check out our latest analysis for EC Healthcare

EC Healthcare's Earnings Easily Cover the Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. The last payment made up 84% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

EC Healthcare's Dividend Has Lacked Consistency

EC Healthcare 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. The dividend has gone from an annual total of HK$0.0191 in 2016 to the most recent total annual payment of HK$0.144. This means that it has been growing its distributions at 40% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though EC Healthcare's EPS has declined at around 4.2% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On EC Healthcare's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for EC Healthcare that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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