Goldlion Holdings' (HKG:533) Upcoming Dividend Will Be Larger Than Last Year's

Goldlion Holdings Limited (HKG:533) will increase its dividend on the 14th of September to HK$0.04, which is 33% higher than last year. This will take the dividend yield from 5.6% to 6.1%, providing a nice boost to shareholder returns.

Check out our latest analysis for Goldlion Holdings

Goldlion Holdings' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Goldlion Holdings' dividend was only 60% of earnings, however it was paying out 143% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Unless the company can turn things around, EPS could fall by 15.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 63%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The dividend has gone from HK$0.19 in 2011 to the most recent annual payment of HK$0.095. The dividend has shrunk at around 6.7% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Earnings per share has been sinking by 15% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Goldlion Holdings' Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Goldlion Holdings is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Goldlion Holdings you should be aware of, and 1 of them is concerning. We have also put together a list of global stocks with a solid dividend.

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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.
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