GDH Guangnan (Holdings)'s (HKG:1203) Upcoming Dividend Will Be Larger Than Last Year's

GDH Guangnan (Holdings) Limited (HKG:1203) has announced that it will be increasing its periodic dividend on the 18th of July to HK$0.025, which will be 25% higher than last year's comparable payment amount of HK$0.02. This will take the dividend yield to an attractive 5.0%, providing a nice boost to shareholder returns.

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GDH Guangnan (Holdings)'s Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. GDH Guangnan (Holdings) is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. 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.

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.

See our latest analysis for GDH Guangnan (Holdings)

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was HK$0.04, compared to the most recent full-year payment of HK$0.035. Doing the maths, this is a decline of about 1.3% per year. 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. GDH Guangnan (Holdings) has impressed us by growing EPS 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.

Our Thoughts On GDH Guangnan (Holdings)'s Dividend

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. This company is not in the top tier of income providing stocks.

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. Taking the debate a bit further, we've identified 2 warning signs for GDH Guangnan (Holdings) that investors need to be conscious of moving forward. 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.