Stock Analysis

Melbourne Enterprises' (HKG:158) Dividend Will Be HK$1.80

SEHK:158
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Melbourne Enterprises Limited (HKG:158) has announced that it will pay a dividend of HK$1.80 per share on the 4th of July. This payment means the dividend yield will be 2.8%, which is below the average for the industry.

See our latest analysis for Melbourne Enterprises

Melbourne Enterprises Might Find It Hard To Continue The Dividend

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Melbourne Enterprises 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 44.6% based on recent performance. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

historic-dividend
SEHK:158 Historic Dividend June 4th 2023

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 annual payment during the last 10 years was HK$4.60 in 2013, and the most recent fiscal year payment was HK$3.60. The dividend has shrunk at around 2.4% 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.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Melbourne Enterprises' EPS has fallen by approximately 45% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

We're Not Big Fans Of Melbourne Enterprises' Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Melbourne Enterprises make more consistent payments in the future. 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. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Melbourne Enterprises that investors should know about before committing capital to this stock. Is Melbourne Enterprises not quite the opportunity you were looking for? Why not check out our selection of top 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.