Hengan International Group's (HKG:1044) Dividend Will Be Reduced To HK$0.86

April 27, 2022
  •  Updated
May 23, 2022
SEHK:1044
Source: Shutterstock

Hengan International Group Company Limited's (HKG:1044) dividend is being reduced to HK$0.86 on the 6th of June. The dividend yield of 5.5% is still a nice boost to shareholder returns, despite the cut.

Check out our latest analysis for Hengan International Group

Hengan International Group's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Hengan International Group was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 1.8%. If the dividend continues on this path, the payout ratio could be 75% by next year, which we think can be pretty sustainable going forward.

historic-dividend
SEHK:1044 Historic Dividend April 27th 2022

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from CN¥1.09 in 2012 to the most recent annual payment of CN¥1.67. This implies that the company grew its distributions at a yearly rate of about 4.3% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Hengan International Group May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Unfortunately, Hengan International Group's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 0.6% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Hengan International Group's Dividend

Overall, we think that Hengan International Group could make a reasonable income stock, even though it did cut the dividend this year. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Hengan International Group that investors should take into consideration. Is Hengan International Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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About SEHK:1044

Hengan International Group

Hengan International Group Company Limited, an investment holding company, manufactures, distributes, and sells personal hygiene products in the People’s Republic of China and internationally.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation3
Future Growth1
Past Performance2
Financial Health6
Dividends4

Read more about these checks in the individual report sections or in our analysis model.

Flawless balance sheet average dividend payer.