SSY Group (HKG:2005) Will Pay A Larger Dividend Than Last Year At HK$0.06

SSY Group Limited (HKG:2005) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of September to HK$0.06. This will take the dividend yield to an attractive 3.7%, providing a nice boost to shareholder returns.

View our latest analysis for SSY Group

SSY Group's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, SSY Group's dividend was only 36% of earnings, however it was paying out 126% of free 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.

The next year is set to see EPS grow by 14.1%. 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.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the dividend has gone from HK$0.0333 total annually to HK$0.13. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

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. We are encouraged to see that SSY Group has grown earnings per share at 13% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for SSY Group's prospects of growing its dividend payments in the future.

Our Thoughts On SSY Group's Dividend

In summary, while it's always good to see the dividend being raised, we don't think SSY Group's payments are rock solid. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

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. For instance, we've picked out 1 warning sign for SSY Group that investors should take into consideration. Is SSY Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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