Computer And Technologies Holdings' (HKG:46) Shareholders Will Receive A Smaller Dividend Than Last Year

Computer And Technologies Holdings Limited's (HKG:46) dividend is being reduced to HK$0.11 on the 22nd of June. This means the annual payment is 6.4% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Computer And Technologies Holdings

Computer And Technologies Holdings' Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Computer And Technologies Holdings was paying out 78% of earnings and more than 75% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

EPS is set to grow by 0.9% over the next year if recent trends continue. If recent patterns in the dividend continue, the payout ratio in 12 months could be 81% which is a bit high but can definitely be sustainable.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from HK$0.12 in 2012 to the most recent annual payment of HK$0.17. This implies that the company grew its distributions at a yearly rate of about 3.5% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Computer And Technologies Holdings' EPS was effectively flat over the past five years, which could stop the company from paying more every year. Computer And Technologies Holdings' earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

Our Thoughts On Computer And Technologies Holdings' Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments are bit high to be considered sustainable, and the track record isn't the best. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Computer And Technologies Holdings that you should be aware of before investing. Is Computer And Technologies Holdings 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.