Tsit Wing International Holdings (HKG:2119) Is Paying Out Less In Dividends Than Last Year

Tsit Wing International Holdings Limited's (HKG:2119) dividend is being reduced from last year's payment covering the same period to HK$0.0219 on the 18th of May. The dividend yield will be in the average range for the industry at 4.4%.

Check out 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. Before making this announcement, Tsit Wing International Holdings was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Unless the company can turn things around, EPS could fall by 2.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 58%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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. Since 2019, the dividend has gone from HK$0.0578 total annually to HK$0.0395. This works out to be a decline of approximately 9.1% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

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

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Over the past five years, it looks as though Tsit Wing International Holdings' EPS has declined at around 2.5% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Tsit Wing International Holdings' Dividend Doesn't Look Sustainable

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

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. For example, we've identified 4 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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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.