Pacific Millennium Packaging Group (HKG:1820) Has Affirmed Its Dividend Of CN¥0.08

Pacific Millennium Packaging Group Corporation (HKG:1820) has announced that it will pay a dividend of CN¥0.08 per share on the 15th of December. The dividend yield is 2.5% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Pacific Millennium Packaging Group

Pacific Millennium Packaging Group Doesn't Earn Enough To Cover Its Payments

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Pacific Millennium Packaging Group's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

If the company can't turn things around, EPS could fall by 29.4% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 259%, which could put the dividend under pressure if earnings don't start to improve.

Pacific Millennium Packaging Group's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2019, the annual payment back then was CN¥0.0878, compared to the most recent full-year payment of CN¥0.148. This means that it has been growing its distributions at 14% per annum over that time. 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.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Pacific Millennium Packaging Group's EPS has fallen by approximately 29% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Pacific Millennium Packaging Group 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 identified 2 warning signs for Pacific Millennium Packaging Group (1 shouldn't be ignored!) that you should be aware of before investing. Is Pacific Millennium Packaging Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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