S E A Holdings (HKG:251) Is Due To Pay A Dividend Of HK$0.03

The board of S E A Holdings Limited (HKG:251) has announced that it will pay a dividend of HK$0.03 per share on the 18th of June. This payment means the dividend yield will be 2.9%, which is below the average for the industry.

View our latest analysis for S E A Holdings

S E A Holdings' Distributions May Be Difficult To Sustain

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. While S E A Holdings is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

EPS has fallen by an average of 74.5% in the past, so this could continue over the next year. This means that the company won't turn a profit over the next year, but with healthy cash flows at the moment the dividend could still be okay to continue.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of HK$0.11 in 2014 to the most recent total annual payment of HK$0.05. This works out to be a decline of approximately 7.6% per year 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.

Dividend Growth Potential Is Shaky

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. S E A Holdings' EPS has fallen by approximately 75% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

S E A Holdings' Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For instance, we've picked out 2 warning signs for S E A Holdings that investors should take into consideration. 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.