Fulu Holdings (HKG:2101) Is Paying Out Less In Dividends Than Last Year

Fulu Holdings Limited's (HKG:2101) dividend is being reduced from last year's payment covering the same period to CN¥0.116 on the 13th of June. This means that the dividend yield is 2.1%, which is a bit low when comparing to other companies in the industry.

Check out our latest analysis for Fulu Holdings

Fulu Holdings' Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Fulu Holdings' dividend was only 42% of earnings, however it was paying out 633% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

EPS is set to fall by 3.6% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 50%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Fulu Holdings' Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The annual payment during the last 2 years was CN¥0.27 in 2021, and the most recent fiscal year payment was CN¥0.101. This works out to a decline of approximately 62% over that time. 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. It's not great to see that Fulu Holdings' earnings per share has fallen at approximately 3.6% per year over the past three years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While Fulu Holdings is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

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. Just as an example, we've come across 2 warning signs for Fulu Holdings you should be aware of, and 1 of them is concerning. 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.