Associated International Hotels (HKG:105) Will Pay A Larger Dividend Than Last Year At HK$0.23

Associated International Hotels Limited (HKG:105) will increase its dividend from last year's comparable payment on the 5th of October to HK$0.23. Even though the dividend went up, the yield is still quite low at only 4.3%.

Check out our latest analysis for Associated International Hotels

Associated International Hotels Might Find It Hard To Continue The Dividend

Even a low dividend yield can be attractive if it is sustained for years on end. Associated International Hotels is not generating a profit, and despite this is paying out most of its free cash flow 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.

Recent, EPS has fallen by 46.6%, so this could continue over the next year. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.

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. Since 2013, the dividend has gone from HK$1.00 total annually to HK$0.34. This works out to a decline of approximately 66% 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.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Over the past five years, it looks as though Associated International Hotels' EPS has declined at around 47% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Associated International Hotels' Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Associated International Hotels will make a great income stock. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.

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 example, we've picked out 2 warning signs for Associated International Hotels 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.