Global International Credit Group's (HKG:1669) Dividend Is Being Reduced To HK$0.05

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. However, the dividend yield of 8.9% is still a decent boost to shareholder returns.

View our latest analysis for Global International Credit Group

Global International Credit Group's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Global International Credit Group was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Unless the company can turn things around, EPS could fall by 6.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 43%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Global International Credit Group's Dividend Has Lacked Consistency

Global International Credit Group has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2015, the annual payment back then was HK$0.027, compared to the most recent full-year payment of HK$0.05. This works out to be a compound annual growth rate (CAGR) of approximately 7.1% a year over that time. 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

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. Global International Credit Group has seen earnings per share falling at 6.0% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. 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 Global International Credit Group is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Global International Credit Group has 3 warning signs (and 1 which is concerning) we think you should know about. 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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