Winfair Investment (HKG:287) Will Pay A Dividend Of HK$0.12

The board of Winfair Investment Company Limited (HKG:287) has announced that it will pay a dividend on the 28th of September, with investors receiving HK$0.12 per share. Including this payment, the dividend yield on the stock will be 2.1%, which is a modest boost for shareholders' returns.

View our latest analysis for Winfair Investment

Winfair Investment Might Find It Hard To Continue The Dividend

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Winfair Investment is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in 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.

Over the next year, EPS might fall by 67.1% based on recent performance. While this means that the company will be unprofitable, we generally believe cash flows are more important, and the current cash payout ratio is quite healthy, which gives us comfort.

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 dividend has gone from an annual total of HK$0.12 in 2013 to the most recent total annual payment of HK$0.14. This works out to be a compound annual growth rate (CAGR) of approximately 1.6% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings per share has been sinking by 67% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Winfair Investment's 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. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Winfair Investment is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Winfair Investment (of which 1 is a bit concerning!) you should know about. 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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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.