Tai Hing Group Holdings (HKG:6811) Is Due To Pay A Dividend Of HK$0.025

Tai Hing Group Holdings Limited (HKG:6811) will pay a dividend of HK$0.025 on the 3rd of November. This makes the dividend yield 7.4%, which will augment investor returns quite nicely.

See our latest analysis for Tai Hing Group Holdings

Tai Hing Group Holdings Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 542% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 12%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, EPS could fall by 63.3% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 1,959%, which could put the dividend under pressure if earnings don't start to improve.

Tai Hing Group Holdings' Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The annual payment during the last 3 years was HK$0.0648 in 2019, and the most recent fiscal year payment was HK$0.0745. This implies that the company grew its distributions at a yearly rate of about 4.8% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Has Limited Growth Potential

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. Earnings per share has been sinking by 63% over the last three years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Tai Hing Group Holdings' Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Tai Hing 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 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Tai Hing Group Holdings has 4 warning signs (and 1 which can't be ignored) we think you should know about. 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.