SANVO Fine Chemicals Group's (HKG:301) Dividend Will Be HK$0.03

The board of SANVO Fine Chemicals Group Limited (HKG:301) has announced that it will pay a dividend on the 8th of July, with investors receiving HK$0.03 per share. The dividend yield is 2.3% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for SANVO Fine Chemicals Group

SANVO Fine Chemicals Group Is Paying Out More Than It Is Earning

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, SANVO Fine Chemicals Group was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. This is a pretty unsustainable practice, and could be risky if continued for the long term.

If the company can't turn things around, EPS could fall by 23.1% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 119%, which could put the dividend under pressure if earnings don't start to improve.

SANVO Fine Chemicals Group Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2020, the dividend has gone from CN¥0.022 to CN¥0.024. This works out to be a compound annual growth rate (CAGR) of approximately 5.6% a year over that time. SANVO Fine Chemicals Group has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Over the past three years, it looks as though SANVO Fine Chemicals Group's EPS has declined at around 23% a year. 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.

SANVO Fine Chemicals Group's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for SANVO Fine Chemicals Group you should be aware of, and 1 of them is a bit concerning. 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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