Glorious Sun Enterprises (HKG:393) Will Pay A Dividend Of HK$0.04

Glorious Sun Enterprises Limited (HKG:393) will pay a dividend of HK$0.04 on the 21st of June. The dividend yield will be 7.7% based on this payment which is still above the industry average.

Check out our latest analysis for Glorious Sun Enterprises

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

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

If the company can't turn things around, EPS could fall by 21.2% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 291%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was HK$0.122 in 2013, and the most recent fiscal year payment was HK$0.06. The dividend has shrunk at around 6.8% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

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 21% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Glorious Sun Enterprises' Dividend Doesn't Look Great

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. We don't think that this is a great candidate to be an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, Glorious Sun Enterprises has 3 warning signs (and 2 which make us uncomfortable) we think you should know about. 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.