Four Seas Mercantile Holdings (HKG:374) Has Affirmed Its Dividend Of HK$0.03

The board of Four Seas Mercantile Holdings Limited (HKG:374) has announced that it will pay a dividend of HK$0.03 per share on the 17th of January. Including this payment, the dividend yield on the stock will be 3.8%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Four Seas Mercantile Holdings

Estimates Indicate Four Seas Mercantile Holdings' Could Struggle to Maintain Dividend Payments In The Future

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, the company was paying out 147% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 12%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

EPS is set to fall by 0.9% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 149%, which could put the dividend under pressure if earnings don't start to improve.

Four Seas Mercantile Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of HK$0.08 in 2014 to the most recent total annual payment of HK$0.095. This works out to be a compound annual growth rate (CAGR) of approximately 1.7% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Unfortunately, Four Seas Mercantile Holdings' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Four Seas Mercantile Holdings' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 picked out 2 warning signs for Four Seas Mercantile Holdings that investors should know about before committing capital to this stock. Is Four Seas Mercantile 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.