Bamboos Health Care Holdings (HKG:2293) Is Reducing Its Dividend To HK$0.0375

Bamboos Health Care Holdings Limited's (HKG:2293) dividend is being reduced from last year's payment covering the same period to HK$0.0375 on the 13th of December. The yield is still above the industry average at 9.7%.

View our latest analysis for Bamboos Health Care Holdings

Bamboos Health Care Holdings' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Bamboos Health Care Holdings was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Over the next year, EPS could expand by 2.1% if recent trends continue. If the dividend continues on this path, the payout ratio could be 69% by next year, which we think can be pretty sustainable going forward.

Bamboos Health Care Holdings' Dividend Has Lacked Consistency

Bamboos Health Care Holdings has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2015, the dividend has gone from HK$0.04 total annually to HK$0.075. This means that it has been growing its distributions at 8.2% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings has been rising at 2.1% per annum over the last five years, which admittedly is a bit slow. Growth of 2.1% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Bamboos Health Care Holdings' Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While Bamboos Health Care Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

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 example, we've picked out 2 warning signs for Bamboos Health Care Holdings that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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