Greatview Aseptic Packaging's (HKG:468) Dividend Is Being Reduced To HK$0.12

Greatview Aseptic Packaging Company Limited (HKG:468) has announced it will be reducing its dividend payable on the 18th of October to HK$0.12. However, the dividend yield of 8.0% is still a decent boost to shareholder returns.

See our latest analysis for Greatview Aseptic Packaging

Greatview Aseptic Packaging Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment was quite easily covered by earnings, but it made up 102% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Over the next year, EPS is forecast to expand by 6.7%. If the dividend continues on its recent course, the payout ratio in 12 months could be 101%, which is a bit high and could start applying pressure to 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. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2012, the first annual payment was CN¥0.16, compared to the most recent full-year payment of CN¥0.22. This implies that the company grew its distributions at a yearly rate of about 3.5% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend's Growth Prospects Are Limited

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. However, Greatview Aseptic Packaging's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Growth of 0.6% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Greatview Aseptic Packaging that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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