Smoore International Holdings (HKG:6969) Is Paying Out Less In Dividends Than Last Year

Smoore International Holdings Limited (HKG:6969) has announced that on 16th of June, it will be paying a dividend ofCN¥0.08, which a reduction from last year's comparable dividend. Based on this payment, the dividend yield will be 1.9%, which is lower than the average for the industry.

See our latest analysis for Smoore International Holdings

Smoore International Holdings' Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Smoore International Holdings' earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 51.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

Smoore International Holdings' Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. The annual payment during the last 2 years was CN¥0.222 in 2021, and the most recent fiscal year payment was CN¥0.139. The dividend has fallen 37% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. We are encouraged to see that Smoore International Holdings has grown earnings per share at 62% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 2 warning signs for Smoore International Holdings you should be aware of, and 1 of them makes us a bit uncomfortable. Is Smoore International Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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