International Housewares Retail (HKG:1373) Is Paying Out Less In Dividends Than Last Year

International Housewares Retail Company Limited (HKG:1373) is reducing its dividend from last year's comparable payment to HK$0.015 on the 24th of October. Based on this payment, the dividend yield will be 3.3%, which is lower than the average for the industry.

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Estimates Indicate International Housewares Retail's Could Struggle to Maintain Dividend Payments In The Future

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 this announcement, International Housewares Retail was paying out 83% of earnings, but a comparatively small 5.0% of free cash flows. This leaves plenty of cash for reinvestment into the business.

EPS is set to fall by 20.6% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 109%, which is definitely a bit high to be sustainable going forward.

Check out our latest analysis for International Housewares Retail

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 2015, the dividend has gone from HK$0.09 total annually to HK$0.03. This works out to a decline of approximately 67% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited 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. International Housewares Retail's earnings per share has shrunk at 21% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Our Thoughts On International Housewares Retail's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for International Housewares Retail (of which 1 is significant!) you should know about. Is International Housewares Retail 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.