Great Eagle Holdings' (HKG:41) Dividend Will Be HK$0.50

The board of Great Eagle Holdings Limited (HKG:41) has announced that it will pay a dividend on the 20th of June, with investors receiving HK$0.50 per share. This payment means that the dividend yield will be 6.4%, which is around the industry average.

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Great Eagle Holdings' Distributions May Be Difficult To Sustain

We aren't too impressed by dividend yields unless they can be sustained over time. Even though Great Eagle Holdings isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Assuming the trend of the last few years continues, EPS will grow by 57.4% over the next 12 months. We like to see the company moving towards profitability, but this probably won't be enough for it to post positive net income this year. The positive free cash flows give us some comfort, however, that the dividend could continue to be sustained.

Check out our latest analysis for Great Eagle Holdings

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$0.66 in 2015 to the most recent total annual payment of HK$0.87. This works out to be a compound annual growth rate (CAGR) of approximately 2.8% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Company Could Face Some Challenges Growing The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Great Eagle Holdings has grown earnings per share at 57% per year over the past five years. While the company hasn't yet recorded a profit, the growth rates are healthy. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.

Our Thoughts On Great Eagle Holdings' Dividend

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 payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Great Eagle Holdings that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.