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

The board of Tai Hing Group Holdings Limited (HKG:6811) has announced that it will pay a dividend on the 3rd of November, with investors receiving HK$0.025 per share. Based on this payment, the dividend yield on the company's stock will be 7.4%, which is an attractive boost to shareholder returns.

See our latest analysis for Tai Hing Group Holdings

Tai Hing Group Holdings Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. 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 means that it has been growing its distributions at 4.8% per annum 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 Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Tai Hing Group Holdings' EPS has fallen by approximately 63% per year during the past three years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

The Dividend Could Prove To Be Unreliable

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 don't think Tai Hing Group Holdings is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, Tai Hing Group Holdings has 4 warning signs (and 1 which is a bit concerning) 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.