SinoMedia Holding's (HKG:623) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of SinoMedia Holding Limited (HKG:623) has announced that it will be paying its dividend of CN¥0.162 on the 12th of July, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 7.8%, which is in line with the average for the industry.

Check out our latest analysis for SinoMedia Holding

SinoMedia Holding's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, SinoMedia Holding was paying only paying out a fraction of earnings, but the payment was a massive 177% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share could rise by 5.3% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 65%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was CN¥0.26 in 2014, and the most recent fiscal year payment was CN¥0.0835. Dividend payments have fallen sharply, down 68% 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.

We Could See SinoMedia Holding's Dividend Growing

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. SinoMedia Holding has impressed us by growing EPS at 5.3% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for SinoMedia Holding's prospects of growing its dividend payments in the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think SinoMedia Holding's payments are rock solid. While SinoMedia Holding is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 3 warning signs for SinoMedia Holding that investors should know about before committing capital to this stock. 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.