Stock Analysis

Asia Financial Holdings' (HKG:662) Dividend Will Be Reduced To HK$0.015

SEHK:662
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Asia Financial Holdings Limited (HKG:662) is reducing its dividend from last year's comparable payment to HK$0.015 on the 7th of October. This means that the dividend yield is 3.5%, which is a bit low when comparing to other companies in the industry.

Check out our latest analysis for Asia Financial Holdings

Asia Financial Holdings' Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Asia Financial Holdings was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, EPS could fall by 5.0% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 35%, which is definitely feasible to continue.

historic-dividend
SEHK:662 Historic Dividend August 29th 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 an annual total of HK$0.035 in 2012 to the most recent total annual payment of HK$0.12. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Over the past five years, it looks as though Asia Financial Holdings' EPS has declined at around 5.0% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Asia Financial 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.