Asia Financial Holdings' (HKG:662) Shareholders Will Receive A Smaller Dividend Than Last Year

Asia Financial Holdings Limited (HKG:662) is reducing its dividend from last year's comparable payment to HK$0.035 on the 9th of June. This payment takes the dividend yield to 1.4%, which only provides a modest boost to overall returns.

View our latest analysis for Asia Financial Holdings

Asia Financial Holdings' Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, Asia Financial Holdings' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Unless the company can turn things around, EPS could fall by 15.2% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 29%, which is definitely feasible to continue.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the dividend has gone from HK$0.078 total annually to HK$0.05. The dividend has shrunk at around 4.3% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Asia Financial Holdings' earnings per share has shrunk at 15% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Asia Financial Holdings that you should be aware of before investing. 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.