Four Seas Mercantile Holdings' (HKG:374) Dividend Will Be HK$0.065

Four Seas Mercantile Holdings Limited (HKG:374) has announced that it will pay a dividend of HK$0.065 per share on the 26th of September. Based on this payment, the dividend yield will be 3.4%, which is fairly typical for the industry.

See our latest analysis for Four Seas Mercantile Holdings

Four Seas Mercantile Holdings Doesn't Earn Enough To Cover Its Payments

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Four Seas Mercantile Holdings' profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

EPS is set to fall by 24.1% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 381%, which is definitely a bit high to be sustainable going forward.

Four Seas Mercantile Holdings Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was HK$0.07 in 2012, and the most recent fiscal year payment was HK$0.095. This means that it has been growing its distributions at 3.1% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Four Seas Mercantile Holdings' EPS has fallen by approximately 24% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On Four Seas Mercantile Holdings' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Four Seas Mercantile Holdings you should be aware of, and 1 of them makes us a bit uncomfortable. If you are a dividend investor, you might also want to look at our curated list of high yield 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.