Safety Godown Company's (HKG:237) Dividend Is Being Reduced To HK$0.03

Safety Godown Company, Limited (HKG:237) has announced that on 18th of September, it will be paying a dividend ofHK$0.03, which a reduction from last year's comparable dividend. This means that the dividend yield is 2.5%, which is a bit low when comparing to other companies in the industry.

View our latest analysis for Safety Godown Company

Safety Godown Company Might Find It Hard To Continue The Dividend

If it is predictable over a long period, even low dividend yields can be attractive. Safety Godown Company is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.

Over the next year, EPS might fall by 54.9% based on recent performance. 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

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was HK$0.113 in 2013, and the most recent fiscal year payment was HK$0.05. This works out to be a decline of approximately 7.9% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

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. Earnings per share has been sinking by 55% over the last 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.

Safety Godown Company's 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. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Safety Godown Company that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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