Tsit Wing International Holdings' (HKG:2119) Dividend Is Being Reduced To HK$0.035

Tsit Wing International Holdings Limited's (HKG:2119) dividend is being reduced by 12% to HK$0.035 per share on 24th of May. The yield is still above the industry average at 7.0%.

View our latest analysis for Tsit Wing International Holdings

Tsit Wing International Holdings' Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Tsit Wing International Holdings was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Over the next year, EPS could expand by 1.7% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 52%, which is in the range that makes us comfortable with the sustainability of the dividend.

Tsit Wing International Holdings' Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The dividend has gone from HK$0.058 in 2019 to the most recent annual payment of HK$0.067. This implies that the company grew its distributions at a yearly rate of about 5.0% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Tsit Wing International Holdings May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Tsit Wing International Holdings hasn't seen much change in its earnings per share over the last five years. Growth of 1.7% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Tsit Wing International Holdings' Dividend

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 low payout ratio is a redeeming feature, but generally we are not too happy with the payments Tsit Wing International Holdings has been making. We don't think Tsit Wing International Holdings is a great stock to add to your portfolio if income is your focus.

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. Taking the debate a bit further, we've identified 2 warning signs for Tsit Wing International Holdings that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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