Goldlion Holdings (HKG:533) Will Pay A Larger Dividend Than Last Year At HK$0.04

The board of Goldlion Holdings Limited (HKG:533) has announced that it will be increasing its dividend by 33% on the 14th of September to HK$0.04. This makes the dividend yield 5.9%, which is above the industry average.

Check out our latest analysis for Goldlion Holdings

Goldlion Holdings' Earnings Easily Cover the Distributions

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 37% of earnings, however it was paying out 143% of free cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

EPS is set to fall by 15.4% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 63%, which is definitely feasible to continue.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was HK$0.19 in 2011, and the most recent fiscal year payment was HK$0.095. Doing the maths, this is a decline of about 6.7% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Goldlion Holdings' EPS has fallen by approximately 15% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Goldlion Holdings' Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Goldlion Holdings will make a great income stock. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Goldlion Holdings you should be aware of, and 1 of them doesn't sit too well with us. 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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