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

Tsit Wing International Holdings Limited (HKG:2119) has announced it will be reducing its dividend payable on the 12th of September to HK$0.019, which is 31% lower than what investors received last year for the same period. However, the dividend yield of 8.2% is still a decent boost to shareholder returns.

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Tsit Wing International Holdings' Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite easily covered by Tsit Wing International Holdings' earnings. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to fall by 9.3% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 62%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Check out our latest analysis for Tsit Wing International Holdings

Tsit Wing International Holdings' Dividend Has Lacked Consistency

It's comforting to see that Tsit Wing International Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of HK$0.0578 in 2019 to the most recent total annual payment of HK$0.0492. Doing the maths, this is a decline of about 2.6% per year. 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 Come By

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though Tsit Wing International Holdings' EPS has declined at around 9.3% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Tsit Wing International Holdings' Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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. 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. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Tsit Wing International Holdings (of which 1 is a bit concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.