Stock Analysis

HKR International (HKG:480) Will Pay A Smaller Dividend Than Last Year

SEHK:480
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HKR International Limited (HKG:480) has announced it will be reducing its dividend payable on the 20th of December to HK$0.03, which is 25% lower than what investors received last year. This means that the annual payment is 2.6% of the current stock price, which is lower than what the rest of the industry is paying.

View our latest analysis for HKR International

HKR International's Earnings Easily Cover the Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, HKR International's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 7.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 13%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
SEHK:480 Historic Dividend November 19th 2021

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2011, the first annual payment was HK$0.17, compared to the most recent full-year payment of HK$0.09. The dividend has shrunk at around 6.3% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Earnings per share has been crawling upwards at 2.4% per year. While growth may be thin on the ground, HKR International could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, HKR International has 4 warning signs (and 2 which can't be ignored) we think you should know about. We have also put together a list of global stocks with a solid dividend.

Valuation is complex, but we're here to simplify it.

Discover if HKR International might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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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