FY Financial (Shenzhen) (HKG:8452) Is Increasing Its Dividend To HK$0.015

The board of FY Financial (Shenzhen) Co., Ltd. (HKG:8452) has announced that it will be increasing its dividend on the 14th of July to HK$0.015. Although the dividend is now higher, the yield is only 3.8%, which is below the industry average.

See our latest analysis for FY Financial (Shenzhen)

FY Financial (Shenzhen)'s Earnings Easily Cover the Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, FY Financial (Shenzhen)'s dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 5.9% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 40%, which is definitely feasible to continue.

FY Financial (Shenzhen)'s Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The dividend has gone from CN¥0.02 in 2018 to the most recent annual payment of CN¥0.013. This works out to a decline of approximately 35% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Come By

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. FY Financial (Shenzhen) has seen earnings per share falling at 5.9% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On FY Financial (Shenzhen)'s Dividend

Overall, we always like to see the dividend being raised, but we don't think FY Financial (Shenzhen) will make a great income stock. 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 probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 5 warning signs for FY Financial (Shenzhen) you should be aware of, and 1 of them can't be ignored. Is FY Financial (Shenzhen) 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.