Karrie International Holdings (HKG:1050) Is Reducing Its Dividend To HK$0.015

Karrie International Holdings Limited (HKG:1050) has announced that on 21st of September, it will be paying a dividend ofHK$0.015, which a reduction from last year's comparable dividend. This means the annual payment is 9.5% of the current stock price, which is above the average for the industry.

View our latest analysis for Karrie International Holdings

Karrie International Holdings Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Karrie International Holdings' earnings. This means that a large portion of its earnings are being retained to grow the business.

If the company can't turn things around, EPS could fall by 3.8% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 675%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was HK$0.012, compared to the most recent full-year payment of HK$0.055. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. Karrie International Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though Karrie International Holdings' EPS has declined at around 3.8% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Karrie International Holdings is a great stock to add to your portfolio if income is your focus.

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. As an example, we've identified 2 warning signs for Karrie International Holdings that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.