Tsit Wing International Holdings (HKG:2119) Is Paying Out A Larger Dividend Than Last Year

Tsit Wing International Holdings Limited (HKG:2119) has announced that it will be increasing its periodic dividend on the 18th of September to HK$0.0184, which will be 4.5% higher than last year's comparable payment amount of HK$0.0176. This makes the dividend yield about the same as the industry average at 5.2%.

See our latest analysis for Tsit Wing International Holdings

Tsit Wing International Holdings' Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Tsit Wing International Holdings' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

EPS is set to fall by 1.5% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 66%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Tsit Wing International Holdings' 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 an annual total of HK$0.0578 in 2019 to the most recent total annual payment of HK$0.0395. The dividend has shrunk at around 9.1% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Achieve

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. However, Tsit Wing International Holdings' EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Tsit Wing International Holdings' Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Tsit Wing International Holdings (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is Tsit Wing International Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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