Pak Fah Yeow International (HKG:239) Will Pay A Larger Dividend Than Last Year At HK$0.028

Pak Fah Yeow International Limited's (HKG:239) dividend will be increasing to HK$0.028 on 10th of December. This makes the dividend yield 3.7%, which is above the industry average.

Check out our latest analysis for Pak Fah Yeow International

Pak Fah Yeow International Might Find It Hard To Continue The Dividend

If the payments aren't sustainable, a high yield for a few years won't matter that much. Pak Fah Yeow International isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. This makes us feel that the dividend will be hard to maintain.

Over the next year, EPS might fall by 33.6% based on recent performance. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2011, the dividend has gone from HK$0.13 to HK$0.076. The dividend has shrunk at around 5.1% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

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. Pak Fah Yeow International's earnings per share has shrunk at 34% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

We're Not Big Fans Of Pak Fah Yeow International's Dividend

Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

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. To that end, Pak Fah Yeow International has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about. We have also put together a list of global stocks with a solid dividend.

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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.
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