Emperor International Holdings' (HKG:163) Upcoming Dividend Will Be Larger Than Last Year's

The board of Emperor International Holdings Limited (HKG:163) has announced that it will be increasing its dividend by 33% on the 14th of September to HK$0.016, up from last year's comparable payment of HK$0.012. This takes the annual payment to 4.4% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Emperor International Holdings

Emperor International Holdings 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 Emperor International Holdings 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. 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.

Over the next year, EPS might fall by 55.2% based on recent performance. While this means that the company will be unprofitable, we generally believe cash flows are more important, and the current cash payout ratio is quite healthy, which gives us comfort.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the annual payment back then was HK$0.102, compared to the most recent full-year payment of HK$0.032. The dividend has fallen 69% 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.

The Dividend Has Limited Growth Potential

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. Earnings per share has been sinking by 55% 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.

Emperor International Holdings' Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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.

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. Just as an example, we've come across 3 warning signs for Emperor International Holdings you should be aware of, and 2 of them are potentially serious. 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.