SUNeVision Holdings (HKG:1686) Is Increasing Its Dividend To HK$0.19

SUNeVision Holdings Ltd. (HKG:1686) will increase its dividend on the 25th of November to HK$0.19. This will take the dividend yield from 2.5% to 2.5%, providing a nice boost to shareholder returns.

See our latest analysis for SUNeVision Holdings

SUNeVision Holdings' Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Earnings per share is forecast to rise by 18.4% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 91%. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

SUNeVision Holdings Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The first annual payment during the last 10 years was HK$0.08 in 2011, and the most recent fiscal year payment was HK$0.19. This works out to be a compound annual growth rate (CAGR) of approximately 9.3% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

There Isn't Much Room To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that SUNeVision Holdings has grown earnings per share at 7.4% per year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for SUNeVision Holdings that you should be aware of before investing. 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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