GDH Guangnan (Holdings) (HKG:1203) Has Announced A Dividend Of HK$0.01

The board of GDH Guangnan (Holdings) Limited (HKG:1203) has announced that it will pay a dividend on the 25th of October, with investors receiving HK$0.01 per share. This means the annual payment is 3.5% of the current stock price, which is above the average for the industry.

Check out our latest analysis for GDH Guangnan (Holdings)

GDH Guangnan (Holdings)'s Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, GDH Guangnan (Holdings) was earning enough to cover the dividend, but free cash flows weren't positive. 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 7.9% if recent trends continue. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2011, the dividend has gone from HK$0.06 to HK$0.025. This works out to be a decline of approximately 8.4% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

We Could See GDH Guangnan (Holdings)'s Dividend Growing

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. GDH Guangnan (Holdings) has impressed us by growing EPS at 7.9% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for GDH Guangnan (Holdings)'s prospects of growing its dividend payments in the future.

Our Thoughts On GDH Guangnan (Holdings)'s Dividend

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. We don't think GDH Guangnan (Holdings) is a great stock to add to your portfolio if income is your focus.

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. To that end, GDH Guangnan (Holdings) has 4 warning signs (and 1 which shouldn't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.
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