Luks Group (Vietnam Holdings) (HKG:366) Will Pay A Smaller Dividend Than Last Year

Luks Group (Vietnam Holdings) Company Limited (HKG:366) has announced that on 14th of June, it will be paying a dividend ofHK$0.02, which a reduction from last year's comparable dividend. This means that the annual payment is 3.4% of the current stock price, which is lower than what the rest of the industry is paying.

See our latest analysis for Luks Group (Vietnam Holdings)

Luks Group (Vietnam Holdings)'s Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, Luks Group (Vietnam Holdings) was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

EPS is set to fall by 10.6% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 36%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was HK$0.05, compared to the most recent full-year payment of HK$0.04. This works out to be a decline of approximately 2.2% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

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. Luks Group (Vietnam Holdings)'s EPS has fallen by approximately 11% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Luks Group (Vietnam Holdings)'s Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Luks Group (Vietnam 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. Case in point: We've spotted 5 warning signs for Luks Group (Vietnam Holdings) (of which 1 shouldn't be ignored!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.