JY Grandmark Holdings (HKG:2231) Will Pay A Larger Dividend Than Last Year At HK$0.044

JY Grandmark Holdings Limited's (HKG:2231) dividend will be increasing to HK$0.044 on 17th of September. Even though the dividend went up, the yield is still quite low at only 4.3%.

Check out our latest analysis for JY Grandmark Holdings

JY Grandmark Holdings' Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, JY Grandmark Holdings' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Unless the company can turn things around, EPS could fall by 27.7% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 59%, which we are pretty comfortable with and we think is feasible on an earnings basis.

JY Grandmark Holdings Doesn't Have A Long Payment History

It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. JY Grandmark Holdings' earnings per share is down 28% over the past year. While this is not ideal, one year is a short time in business, and we wouldn't want to get too hung up on this. Any one year of performance can be misleading for a variety of reasons, so we wouldn't like to form any strong conclusions based on these numbers alone.

JY Grandmark Holdings' Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think JY Grandmark Holdings' payments are rock solid. While JY Grandmark Holdings is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for JY Grandmark Holdings (2 don't sit too well with us!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.
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