Greatview Aseptic Packaging (HKG:468) Will Pay A Smaller Dividend Than Last Year

Greatview Aseptic Packaging Company Limited (HKG:468) is reducing its dividend to HK$0.12 on the 18th of October. The dividend yield of 8.0% is still a nice boost to shareholder returns, despite the cut.

Check out our latest analysis for Greatview Aseptic Packaging

Greatview Aseptic Packaging Doesn't Earn Enough To Cover Its Payments

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Greatview Aseptic Packaging's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 102% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

The next 12 months is set to see EPS grow by 5.6%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 104%, which probably can't continue putting some pressure on the balance sheet.

Greatview Aseptic Packaging's Dividend Has Lacked Consistency

It's comforting to see that Greatview Aseptic Packaging has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The first annual payment during the last 9 years was CN¥0.16 in 2012, and the most recent fiscal year payment was CN¥0.22. This means that it has been growing its distributions at 3.5% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Greatview Aseptic Packaging's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

Greatview Aseptic Packaging'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. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think Greatview Aseptic Packaging 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. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Greatview Aseptic Packaging that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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