Soundwill Holdings (HKG:878) Has Announced A Dividend Of HK$0.20

Soundwill Holdings Limited (HKG:878) has announced that it will pay a dividend of HK$0.20 per share on the 16th of June. The dividend yield is 3.0% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Soundwill Holdings

Soundwill Holdings' Distributions May Be Difficult To Sustain

Even a low dividend yield can be attractive if it is sustained for years on end. While Soundwill 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. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Over the next year, EPS might fall by 67.6% based on recent performance. This means that the company will be unprofitable, but cash flows are more important when considering the dividend and as the current cash payout ratio is pretty healthy, we don't think there is too much reason to worry.

Soundwill Holdings Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the dividend has gone from HK$0.13 to HK$0.20. This implies that the company grew its distributions at a yearly rate of about 4.4% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Soundwill Holdings' earnings per share has shrunk at 68% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. Overall, we don't think this company has the makings of a good income stock.

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 2 warning signs for Soundwill 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.