Sunwah Kingsway Capital Holdings' (HKG:188) Dividend Will Be Reduced To HK$0.01

Sunwah Kingsway Capital Holdings Limited (HKG:188) has announced that on 19th of January, it will be paying a dividend ofHK$0.01, which a reduction from last year's comparable dividend. This means the annual payment is 6.2% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Sunwah Kingsway Capital Holdings

Sunwah Kingsway Capital Holdings Might Find It Hard To Continue The Dividend

If the payments aren't sustainable, a high yield for a few years won't matter that much. While Sunwah Kingsway Capital Holdings is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

EPS has fallen by an average of 27.9% in the past, so this could continue over the next year. This means that the company will be unprofitable, but cash flows are more important when considering the dividend and as the current cash payout ratio is pretty healthy, we don't think there is too much reason to worry.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was HK$0.09 in 2012, and the most recent fiscal year payment was HK$0.02. This works out to a decline of approximately 78% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Sunwah Kingsway Capital Holdings' EPS has fallen by approximately 28% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Sunwah Kingsway Capital Holdings' Dividend Doesn't Look Sustainable

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. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Sunwah Kingsway Capital Holdings has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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