Global International Credit Group (HKG:1669) Will Pay A Smaller Dividend Than Last Year

Global International Credit Group Limited (HKG:1669) is reducing its dividend to HK$0.05 on the 28th of Junewhich is 2.0% less than last year's comparable payment of HK$0.051. Despite the cut, the dividend yield of 8.3% will still be comparable to other companies in the industry.

Check out our latest analysis for Global International Credit Group

Global International Credit Group's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, Global International Credit Group's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 6.0% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 43%, which is definitely feasible to continue.

Global International Credit Group's Dividend Has Lacked Consistency

It's comforting to see that Global International Credit Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2015, the dividend has gone from HK$0.027 total annually to HK$0.05. This implies that the company grew its distributions at a yearly rate of about 7.1% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth Is Doubtful

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Global International Credit Group has seen earnings per share falling at 6.0% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Global International Credit Group (1 is potentially serious!) that you should be aware of before investing. Is Global International Credit Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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