Da Ming International Holdings (HKG:1090) Has Announced A Dividend Of HK$0.06

Da Ming International Holdings Limited's (HKG:1090) investors are due to receive a payment of HK$0.06 per share on 29th of June. This payment means that the dividend yield will be 4.5%, which is around the industry average.

See our latest analysis for Da Ming International Holdings

Da Ming International Holdings' Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Da Ming International Holdings' earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS could expand by 2.4% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2012, the dividend has gone from CN¥0.028 to CN¥0.099. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend's Growth Prospects Are Limited

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. However, Da Ming International Holdings has only grown its earnings per share at 2.4% per annum over the past five years. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. 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. For example, we've identified 3 warning signs for Da Ming International Holdings (1 shouldn't be ignored!) that you should be aware of before investing. Is Da Ming International Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.