Shoucheng Holdings (HKG:697) Is Paying Out Less In Dividends Than Last Year

Shoucheng Holdings Limited (HKG:697) is reducing its dividend from last year's comparable payment to HK$0.0164 on the 7th of August. This means that the annual payment is 3.0% of the current stock price, which is lower than what the rest of the industry is paying.

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Shoucheng Holdings' Projected Earnings Seem Likely To Cover Future Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Shoucheng Holdings was paying out quite a large proportion of both earnings and cash flow, with the dividend being 168% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

The next year is set to see EPS grow by 103.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 58%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

View our latest analysis for Shoucheng Holdings

Shoucheng Holdings' Dividend Has Lacked Consistency

Looking back, Shoucheng Holdings' dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The annual payment during the last 6 years was HK$0.128 in 2019, and the most recent fiscal year payment was HK$0.045. The dividend has fallen 65% over 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 Is Doubtful

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 7.5% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

The Dividend Could Prove To Be Unreliable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments are bit high to be considered sustainable, and the track record isn't the best. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Shoucheng Holdings that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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