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 19th of July. Including this payment, the dividend yield on the stock will be 2.5%, which is a modest boost for shareholders' returns.

View our latest analysis for Pacific Millennium Packaging Group

Pacific Millennium Packaging Group Is Paying Out More Than It Is Earning

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Pacific Millennium Packaging Group's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Looking forward, EPS could fall by 28.4% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 207%, which could put the dividend under pressure if earnings don't start to improve.

Pacific Millennium Packaging Group's Dividend Has Lacked Consistency

Pacific Millennium Packaging Group has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. 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 11% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Dividend Growth Potential Is Shaky

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. Pacific Millennium Packaging Group's EPS has fallen by approximately 28% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Pacific Millennium Packaging Group's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Pacific Millennium Packaging Group that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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