Medialink Group (HKG:2230) Is Paying Out A Larger Dividend Than Last Year

Medialink Group Limited's (HKG:2230) periodic dividend will be increasing on the 30th of October to HK$0.0042, with investors receiving 20% more than last year's HK$0.0035. This will take the dividend yield to an attractive 6.2%, providing a nice boost to shareholder returns.

View our latest analysis for Medialink Group

Medialink Group's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment was quite easily covered by earnings, but it made up 144% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

EPS is set to fall by 17.8% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 53%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Medialink Group's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2019, the annual payment back then was HK$0.013, compared to the most recent full-year payment of HK$0.0112. The dividend has shrunk at around 3.7% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

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. Medialink Group's EPS has fallen by approximately 18% 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.

Medialink Group's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Medialink Group's payments are rock solid. While Medialink Group is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Medialink Group has 4 warning signs (and 1 which is concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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