SSY Group (HKG:2005) Will Pay A Larger Dividend Than Last Year At HK$0.07

The board of SSY Group Limited (HKG:2005) has announced that it will be increasing its dividend by 17% on the 27th of September to HK$0.07, up from last year's comparable payment of HK$0.06. The payment will take the dividend yield to 3.4%, which is in line with the average for the industry.

See our latest analysis for SSY Group

SSY Group's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, SSY Group was paying only paying out a fraction of earnings, but the payment was a massive 132% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to expand by 77.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was HK$0.04, compared to the most recent full-year payment of HK$0.14. This means that it has been growing its distributions at 13% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

We Could See SSY Group's Dividend Growing

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. It's encouraging to see that SSY Group has been growing its earnings per share at 7.3% a 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.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think SSY Group's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for SSY Group that investors should know about before committing capital to this stock. 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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