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

The board of Medialink Group Limited (HKG:2230) has announced that it will be increasing its dividend by 27% on the 15th of January to HK$0.0089, up from last year's comparable payment of HK$0.007. This will take the dividend yield to an attractive 6.1%, providing a nice boost to shareholder returns.

Check out our latest analysis for Medialink Group

Medialink Group's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Medialink Group was paying only paying out a fraction of earnings, but the payment was a massive 143% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

EPS is set to fall by 21.5% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 58%, 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

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2019, the annual payment back then was HK$0.013, compared to the most recent full-year payment of HK$0.0112. This works out to be a decline of approximately 3.7% per year over that time. 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.

Dividend Growth Potential Is Shaky

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. Medialink Group's earnings per share has shrunk at 21% a year over the past five years. 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.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Medialink Group is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 4 warning signs for Medialink Group you should be aware of, and 1 of them can't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.