Sunac Services Holdings (HKG:1516) Is Due To Pay A Dividend Of CN¥0.156

Sunac Services Holdings Limited's (HKG:1516) investors are due to receive a payment of CN¥0.156 per share on 6th of June. This makes the dividend yield 8.9%, which will augment investor returns quite nicely.

Our free stock report includes 1 warning sign investors should be aware of before investing in Sunac Services Holdings. Read for free now.

Sunac Services Holdings' Long-term Dividend Outlook appears Promising

If the payments aren't sustainable, a high yield for a few years won't matter that much. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. This makes us feel that the dividend will be hard to maintain.

According to analysts, EPS should be several times higher next year. If the dividend extends its recent trend, estimates say the dividend could reach 53%, which we would be comfortable to see continuing.

See our latest analysis for Sunac Services Holdings

Sunac Services Holdings Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. Since 2021, the dividend has gone from CN¥0.058 total annually to CN¥0.143. This works out to be a compound annual growth rate (CAGR) of approximately 25% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Sunac Services Holdings' earnings per share has shrunk at 54% a year over the past five years. 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. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

We're Not Big Fans Of Sunac Services Holdings' Dividend

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. We don't think that this is a great candidate to be an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Sunac Services Holdings that investors should take into consideration. Is Sunac Services Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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