WEILONG Delicious Global Holdings (HKG:9985) Is Increasing Its Dividend To CN¥0.317

The board of WEILONG Delicious Global Holdings Ltd (HKG:9985) has announced that it will be paying its dividend of CN¥0.317 on the 30th of June, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 3.3%.

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WEILONG Delicious Global Holdings' Payment Could Potentially Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, WEILONG Delicious Global Holdings' dividend was only 58% of earnings, however it was paying out 106% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 67.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 67% by next year, which is in a pretty sustainable range.

See our latest analysis for WEILONG Delicious Global Holdings

WEILONG Delicious Global Holdings Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The annual payment during the last 2 years was CN¥0.12 in 2023, and the most recent fiscal year payment was CN¥0.45. This works out to be a compound annual growth rate (CAGR) of approximately 94% a year over that time. WEILONG Delicious Global Holdings has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

We Could See WEILONG Delicious Global Holdings' Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. WEILONG Delicious Global Holdings has seen EPS rising for the last five years, at 5.9% per annum. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for WEILONG Delicious Global Holdings that investors should take into consideration. 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.