HKR International's (HKG:480) Shareholders Will Receive A Smaller Dividend Than Last Year

HKR International Limited (HKG:480) has announced it will be reducing its dividend payable on the 20th of September to HK$0.05. This means that the dividend yield is 2.4%, which is a bit low when comparing to other companies in the industry.

See our latest analysis for HKR International

HKR International's Payment Has Solid Earnings Coverage

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. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 22.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 18%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2011, the dividend has gone from HK$0.22 to HK$0.09. Doing the maths, this is a decline of about 8.5% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. HKR International has seen EPS rising for the last five years, at 5.2% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On HKR International's Dividend

Even though the dividend was cut this year, we think HKR International has the ability to make consistent payments in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for HKR International that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.

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