Ever Reach Group (Holdings) (HKG:3616) Has Re-Affirmed Its Dividend Of HK$0.06

Ever Reach Group (Holdings) Company Limited (HKG:3616) will pay a dividend of HK$0.06 on the 8th of July. This means the annual payment is 8.5% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Ever Reach Group (Holdings)

Ever Reach Group (Holdings)'s Earnings Easily Cover the Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Ever Reach Group (Holdings) is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. 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.

Over the next year, EPS could expand by 25.4% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

Ever Reach Group (Holdings)'s Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. There hasn't been much of a change in the dividend over the last 3. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Ever Reach Group (Holdings) has impressed us by growing EPS at 25% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Ever Reach Group (Holdings)'s Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Ever Reach Group (Holdings)'s payments, as there could be some issues with sustaining them into the future. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Ever Reach Group (Holdings) (of which 1 doesn't sit too well with us!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.