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 it will be reducing its dividend by 2.0% from last year's payment of HK$0.051 on the 28th of June, with shareholders receiving HK$0.05. The yield is still above the industry average at 9.6%.

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. 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 its earnings are being retained to grow the business.

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

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. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of HK$0.027 in 2015 to the most recent total annual payment of HK$0.05. This means that it has been growing its distributions at 7.1% per annum over that time. 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.

Dividend Growth Is Doubtful

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, Global International Credit Group's earnings per share has shrunk at approximately 6.0% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Global International Credit Group (of which 1 can't be ignored!) 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.