Sunwah Kingsway Capital Holdings (HKG:188) Is Due To Pay A Dividend Of HK$0.01

The board of Sunwah Kingsway Capital Holdings Limited (HKG:188) has announced that it will pay a dividend on the 23rd of January, with investors receiving HK$0.01 per share. This makes the dividend yield 9.0%, which will augment investor returns quite nicely.

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. Even in the absence of profits, Sunwah Kingsway Capital Holdings is paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Recent, EPS has fallen by 30.4%, so this could continue over the next year. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of HK$0.05 in 2014 to the most recent total annual payment of HK$0.02. This works out to be a decline of approximately 8.8% per year 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 the track record hasn't been stellar, we really want to see earnings per share growing over time. Over the past five years, it looks as though Sunwah Kingsway Capital Holdings' EPS has declined at around 30% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Sunwah Kingsway Capital Holdings' Dividend Doesn't Look Great

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.

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. Just as an example, we've come across 4 warning signs for Sunwah Kingsway Capital Holdings you should be aware of, and 2 of them make us uncomfortable. Is Sunwah Kingsway Capital Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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