Associated International Hotels (HKG:105) Is Reducing Its Dividend To HK$0.11

Associated International Hotels Limited (HKG:105) is reducing its dividend from last year's comparable payment to HK$0.11 on the 5th of January. This means that the annual payment is 3.2% of the current stock price, which is lower than what the rest of the industry is paying.

Check out our latest analysis for Associated International Hotels

Associated International Hotels Might Find It Hard To Continue The Dividend

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. While Associated International Hotels is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. 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.

Over the next year, EPS might fall by 48.9% based on recent performance. This means that the company won't turn a profit over the next year, but with healthy cash flows at the moment the dividend could still be okay to continue.

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. Since 2012, the annual payment back then was HK$0.83, compared to the most recent full-year payment of HK$0.32. The dividend has shrunk at around 9.1% 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 Potential Is Shaky

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. Associated International Hotels' earnings per share has shrunk at 49% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Associated International Hotels' Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Associated International Hotels (of which 1 can't be ignored!) you should know about. 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.