Glorious Sun Enterprises (HKG:393) Has Announced That It Will Be Increasing Its Dividend To HK$0.048

Glorious Sun Enterprises Limited's (HKG:393) dividend will be increasing from last year's payment of the same period to HK$0.048 on 19th of June. This makes the dividend yield 7.2%, which is above the industry average.

Check out our latest analysis for Glorious Sun Enterprises

Glorious Sun Enterprises Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Looking forward, EPS could fall by 11.4% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 248%, which is definitely a bit high to be sustainable going forward.

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. The annual payment during the last 10 years was HK$0.122 in 2014, and the most recent fiscal year payment was HK$0.068. The dividend has shrunk at around 5.6% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Over the past five years, it looks as though Glorious Sun Enterprises' EPS has declined at around 11% a year. 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.

We're Not Big Fans Of Glorious Sun Enterprises' Dividend

In summary, investors will like to be receiving a higher dividend, but we have some questions about whether it can be sustained over the long term. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.

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 3 warning signs for Glorious Sun Enterprises you should be aware of, and 2 of them shouldn't be ignored. Is Glorious Sun Enterprises 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.