EuroEyes International Eye Clinic (HKG:1846) Is Paying Out Less In Dividends Than Last Year

EuroEyes International Eye Clinic Limited's (HKG:1846) dividend is being reduced from last year's payment covering the same period to HK$0.0489 on the 28th of June. Based on this payment, the dividend yield will be 1.8%, which is lower than the average for the industry.

Check out our latest analysis for EuroEyes International Eye Clinic

EuroEyes International Eye Clinic's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, EuroEyes International Eye Clinic's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 21.7% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 21%, which is in the range that makes us comfortable with the sustainability of the dividend.

EuroEyes International Eye Clinic's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. Since 2021, the dividend has gone from HK$0.0299 total annually to HK$0.0978. This implies that the company grew its distributions at a yearly rate of about 48% over that duration. EuroEyes International Eye Clinic has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that EuroEyes International Eye Clinic has been growing its earnings per share at 22% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like EuroEyes International Eye Clinic's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like EuroEyes International Eye Clinic does. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

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. See if management have their own wealth at stake, by checking insider shareholdings in EuroEyes International Eye Clinic stock. 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.