Shenguan Holdings (Group) (HKG:829) Is Due To Pay A Dividend Of HK$0.06

The board of Shenguan Holdings (Group) Limited (HKG:829) has announced that it will pay a dividend on the 30th of June, with investors receiving HK$0.06 per share. This makes the dividend yield 12%, which will augment investor returns quite nicely.

Check out our latest analysis for Shenguan Holdings (Group)

Shenguan Holdings (Group) Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Shenguan Holdings (Group)'s earnings. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to fall by 4.3% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 153%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the dividend has gone from CN¥0.07 to CN¥0.017. Dividend payments have fallen sharply, down 76% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Shenguan Holdings (Group) May Find It Hard To Grow The Dividend

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. It's not great to see that Shenguan Holdings (Group)'s earnings per share has fallen at approximately 4.3% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

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, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Shenguan Holdings (Group) that investors should take into consideration. 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.