Winfair Investment (HKG:287) Is Paying Out A Dividend Of HK$0.12

The board of Winfair Investment Company Limited (HKG:287) has announced that it will pay a dividend of HK$0.12 per share on the 30th of September. The dividend yield is 3.6% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Winfair Investment

Winfair Investment's 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 Winfair Investment 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. This gives us some comfort about the level of the dividend payments.

Over the next year, EPS might fall by 39.1% based on recent performance. 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 annual payment during the last 10 years was HK$0.12 in 2014, and the most recent fiscal year payment was HK$0.14. This means that it has been growing its distributions at 1.6% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Winfair Investment's earnings per share has shrunk at 39% a year over 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.

Winfair Investment's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Winfair Investment's payments, as there could be some issues with sustaining them into the future. 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. 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 identified 4 warning signs for Winfair Investment (1 is potentially serious!) that you should be aware of before investing. Is Winfair Investment not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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