Four Seas Mercantile Holdings (HKG:374) Is Due To Pay A Dividend Of HK$0.03

Four Seas Mercantile Holdings Limited (HKG:374) will pay a dividend of HK$0.03 on the 18th of January. This means the annual payment will be 3.7% of the current stock price, which is lower than the industry average.

View our latest analysis for Four Seas Mercantile Holdings

Four Seas Mercantile Holdings Is Paying Out More Than It Is Earning

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, the company was paying out 289% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 15%. 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.

Looking forward, EPS could fall by 21.3% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 374%, which could put the dividend in jeopardy if the company's earnings don't 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. Since 2013, the annual payment back then was HK$0.07, compared to the most recent full-year payment of HK$0.095. This means that it has been growing its distributions at 3.1% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Four Seas Mercantile Holdings' earnings per share has shrunk at 21% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

In Summary

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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 3 warning signs for Four Seas Mercantile Holdings that investors should know about before committing capital to this stock. 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.