Stock Analysis

SinoMedia Holding's (HKG:623) Dividend Will Be Reduced To HK$0.04

SEHK:623
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SinoMedia Holding Limited (HKG:623) has announced it will be reducing its dividend payable on the 8th of July to HK$0.04. This payment takes the dividend yield to 4.3%, which only provides a modest boost to overall returns.

See our latest analysis for SinoMedia Holding

SinoMedia Holding's Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, SinoMedia Holding was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

If the trend of the last few years continues, EPS will grow by 16.4% over the next 12 months. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

historic-dividend
SEHK:623 Historic Dividend April 4th 2022

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The dividend has gone from CN¥0.17 in 2012 to the most recent annual payment of CN¥0.032. This works out to a decline of approximately 81% 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.

The Dividend Looks Likely To Grow

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. We are encouraged to see that SinoMedia Holding has grown earnings per share at 16% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

We Really Like SinoMedia Holding's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like SinoMedia Holding does. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 5 warning signs for SinoMedia Holding that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Valuation is complex, but we're helping make it simple.

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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.