Associated International Hotels (HKG:105) Is Due To Pay A Dividend Of HK$0.19

Associated International Hotels Limited's (HKG:105) investors are due to receive a payment of HK$0.19 per share on 8th of October. However, the dividend yield of 6.5% still remains in a typical range for the industry.

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Associated International Hotels Might Find It Hard To Continue The Dividend

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Even while not generating a profit, Associated International Hotels is paying out most of its free cash flows as a dividend. Generally paying a dividend without making profits isn't a great idea and we are also worried that there is limited reinvestment into the business.

Over the next year, EPS could expand by 24.5% if recent trends continue. This is the right direction to be moving, but it is probably not enough to achieve profitability. Unless this can be done in short order, the dividend might be difficult to sustain.

Check out our latest analysis for Associated International Hotels

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of HK$1.20 in 2015 to the most recent total annual payment of HK$0.35. The dividend has fallen 71% over that period. 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 Company Could Face Some Challenges Growing The Dividend

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Associated International Hotels has seen EPS rising for the last five years, at 25% per annum. While the company is not yet turning a profit, it is growing at a good rate. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.

Associated International Hotels' Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. Strong earnings growth means Associated International Hotels has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Associated International Hotels that investors need to be conscious of moving forward. 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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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.