Shoucheng Holdings (HKG:697) Has Announced That Its Dividend Will Be Reduced To HK$0.022

Shoucheng Holdings Limited (HKG:697) has announced it will be reducing its dividend payable on the 5th of August to HK$0.022, which is 59% lower than what investors received last year for the same period. The dividend yield will be in the average range for the industry at 6.0%.

Check out our latest analysis for Shoucheng Holdings

Shoucheng Holdings' Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Shoucheng Holdings' dividend made up quite a large proportion of earnings but only of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, could fall by 6.4% if the company can't turn things around from the last few years. If recent patterns in the dividend continue, we could see the payout ratio reaching 93% in the next 12 months which is on the higher end of the range we would say is sustainable.

Shoucheng Holdings' Dividend Has Lacked Consistency

Shoucheng Holdings has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of HK$0.128 in 2019 to the most recent total annual payment of HK$0.0859. The dividend has shrunk at around 7.6% a year during that period. 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 May Be Hard To Come By

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. In the last five years, Shoucheng Holdings' earnings per share has shrunk at approximately 6.4% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On Shoucheng Holdings' Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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 Shoucheng 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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