Stock Analysis

SinoMedia Holding (HKG:623) Has Announced That It Will Be Increasing Its Dividend To CN¥0.045

SEHK:623
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The board of SinoMedia Holding Limited (HKG:623) has announced that the dividend on 12th of July will be increased to CN¥0.045, which will be 13% higher than last year's payment of CN¥0.04 which covered the same period. Even though the dividend went up, the yield is still quite low at only 5.1%.

Check out our latest analysis for SinoMedia Holding

SinoMedia Holding's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, SinoMedia Holding's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

EPS is set to fall by 12.7% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 51%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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SEHK:623 Historic Dividend June 13th 2023

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 CN¥0.218, compared to the most recent full-year payment of CN¥0.0394. Dividend payments have fallen sharply, down 82% 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

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Over the past five years, it looks as though SinoMedia Holding's EPS has declined at around 13% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

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. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for SinoMedia Holding you should be aware of, and 1 of them is significant. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.