Cheuk Nang (Holdings)'s (HKG:131) Dividend Is Being Reduced To HK$0.02

Cheuk Nang (Holdings) Limited (HKG:131) is reducing its dividend from last year's comparable payment to HK$0.02 on the 15th of December. This means that the annual payment is 1.6% of the current stock price, which is lower than what the rest of the industry is paying.

View our latest analysis for Cheuk Nang (Holdings)

Cheuk Nang (Holdings)'s Distributions May Be Difficult To Sustain

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Despite not generating a profit, Cheuk Nang (Holdings) is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Recent, EPS has fallen by 46.8%, so this could continue over the next year. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the dividend has gone from HK$0.085 total annually to HK$0.035. This works out to be a decline of approximately 8.5% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Earnings per share has been sinking by 47% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Cheuk Nang (Holdings)'s Dividend Doesn't Look Great

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, the dividend is not reliable enough to make this a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Cheuk Nang (Holdings) that investors need to be conscious of moving forward. Is Cheuk Nang (Holdings) not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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