Oriental Explorer Holdings' (HKG:430) Dividend Will Be Reduced To HK$0.012

Oriental Explorer Holdings Limited (HKG:430) is reducing its dividend to HK$0.012 on the 21st of Junewhich is 40% less than last year's comparable payment of HK$0.02. This means the annual payment is 7.6% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Oriental Explorer Holdings

Oriental Explorer Holdings' Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Oriental Explorer Holdings was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, EPS could fall by 46.9% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 72%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Oriental Explorer Holdings' Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. Since 2021, the annual payment back then was HK$0.02, compared to the most recent full-year payment of HK$0.028. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Oriental Explorer Holdings' EPS has declined at around 47% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Oriental Explorer Holdings has 5 warning signs (and 1 which is a bit concerning) we think you should know about. Is Oriental Explorer Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.