Four Seas Mercantile Holdings (HKG:374) Will Pay A Dividend Of HK$0.065

The board of Four Seas Mercantile Holdings Limited (HKG:374) has announced that it will pay a dividend on the 26th of September, with investors receiving HK$0.065 per share. This payment means the dividend yield will be 3.4%, which is below the average for the industry.

View our latest analysis for Four Seas Mercantile Holdings

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

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 289% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 14%. 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.

If the company can't turn things around, EPS could fall by 24.1% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 381%, 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 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. 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 could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Earnings per share has been sinking by 24% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Four Seas Mercantile Holdings' payments, as there could be some issues with sustaining them into the future. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 4 warning signs for Four Seas Mercantile Holdings you should be aware of, and 1 of them doesn't sit too well with us. 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.