Great Eagle Holdings (HKG:41) Has Announced A Dividend Of HK$0.50

Great Eagle Holdings Limited (HKG:41) will pay a dividend of HK$0.50 on the 20th of June. Based on this payment, the dividend yield will be 7.4%, which is fairly typical for the industry.

See our latest analysis for Great Eagle Holdings

Great Eagle Holdings' Distributions May Be Difficult To Sustain

Solid dividend yields are great, but they only really help us if the payment is sustainable. Great Eagle Holdings 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.

Looking forward, earnings per share could rise by 57.4% over the next year if the trend from the last few years continues. It's nice to see things moving in the right direction, but this probably won't be enough for the company to turn a profit. The healthy cash flows are definitely as good sign, though so we wouldn't panic just yet, especially with the earnings growing.

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 annual payment during the last 10 years was HK$0.66 in 2015, and the most recent fiscal year payment was 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Great Eagle Holdings has grown earnings per share at 57% per year over the past five years. Even though the company is not profitable, it is growing at a solid clip. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Great Eagle Holdings' 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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Great Eagle Holdings that investors should know about before committing capital to this stock. Is Great Eagle Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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