GDH Guangnan (Holdings) (HKG:1203) Will Pay A Larger Dividend Than Last Year At HK$0.025

GDH Guangnan (Holdings) Limited's (HKG:1203) periodic dividend will be increasing on the 18th of July to HK$0.025, with investors receiving 25% more than last year's HK$0.02. This will take the annual payment to 4.4% of the stock price, which is above what most companies in the industry pay.

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GDH Guangnan (Holdings)'s Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. GDH Guangnan (Holdings) is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS could expand by 21.0% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 18% by next year, which is in a pretty sustainable range.

View our latest analysis for GDH Guangnan (Holdings)

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of HK$0.04 in 2015 to the most recent total annual payment of HK$0.035. The dividend has shrunk at around 1.3% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that GDH Guangnan (Holdings) has grown earnings per share at 21% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think GDH Guangnan (Holdings)'s payments are rock solid. While GDH Guangnan (Holdings) is earning enough to cover the payments, the cash flows are lacking. We don't think GDH Guangnan (Holdings) is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for GDH Guangnan (Holdings) that investors should know about before committing capital to this stock. Is GDH Guangnan (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.