Radiance Holdings (Group)'s (HKG:9993) Shareholders Will Receive A Smaller Dividend Than Last Year

Radiance Holdings (Group) Company Limited (HKG:9993) is reducing its dividend to HK$0.16 on the 1st of January. This means that the dividend yield is 3.8%, which is a bit low when comparing to other companies in the industry.

Check out our latest analysis for Radiance Holdings (Group)

Radiance Holdings (Group)'s Earnings Easily Cover the Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Radiance Holdings (Group) was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 9.2% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 22%, which is definitely feasible to continue.

Radiance Holdings (Group) Is Still Building Its Track Record

Without a track record of dividend payments, we can't make a judgement on how stable it has been. 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.

Dividend Growth Is Doubtful

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. EPS has fallen 9.2% over the last 12 months. A one off decline isn't a massive problem, but if it continues it could start to cause larger issues. We do note though, one year is too short a time to be drawing strong conclusions about a company's future prospects.

Our Thoughts On Radiance Holdings (Group)'s Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Radiance Holdings (Group) (of which 1 is significant!) you should know about. Is Radiance Holdings (Group) not quite the opportunity you were looking for? Why not check out our selection of top 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.