Global International Credit Group's (HKG:1669) Shareholders Will Receive A Smaller Dividend Than Last Year

The board of Global International Credit Group Limited (HKG:1669) has announced that the dividend on 20th of June will be reduced by 3.8% from last year's HK$0.053 to HK$0.051. This means the annual payment is 9.6% of the current stock price, which is above the average for the industry.

View our latest analysis for Global International Credit Group

Global International Credit Group's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Global International Credit Group's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, EPS could fall by 4.2% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 41%, 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 suggests that the dividend might not be the most reliable. The annual payment during the last 8 years was HK$0.027 in 2015, and the most recent fiscal year payment was HK$0.051. This implies that the company grew its distributions at a yearly rate of about 8.3% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend's Growth Prospects Are Limited

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 4.2% 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.

Global International Credit Group's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Global International Credit Group (1 is concerning!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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