SUNeVision Holdings Ltd.'s (HKG:1686) dividend will be increasing to HK$0.19 on 25th of November. This takes the dividend yield from 2.7% to 2.7%, which shareholders will be pleased with.
SUNeVision Holdings' Dividend Is Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the dividend made up 100% of earnings, and the company was generating negative free cash flows. This high of a dividend payment could start to put pressure on the balance sheet in the future.
EPS is set to grow by 18.4% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 91% which is a bit high but can definitely be sustainable.
SUNeVision Holdings Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the dividend has gone from HK$0.066 to HK$0.19. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
There Isn't Much Room To Grow The Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. SUNeVision Holdings has seen EPS rising for the last five years, at 7.4% per annum. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.
SUNeVision Holdings' Dividend Doesn't Look Sustainable
In summary, while it's always good to see the dividend being raised, we don't think SUNeVision Holdings' payments are rock solid. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for SUNeVision Holdings that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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