S.A.S. Dragon Holdings' (HKG:1184) Dividend Will Be Reduced To HK$0.25

S.A.S. Dragon Holdings Limited (HKG:1184) is reducing its dividend from last year's comparable payment to HK$0.25 on the 7th of June. The dividend yield of 9.9% is still a nice boost to shareholder returns, despite the cut.

Check out our latest analysis for S.A.S. Dragon Holdings

S.A.S. Dragon Holdings' Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, S.A.S. Dragon Holdings was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share could rise by 5.7% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 62%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of HK$0.065 in 2013 to the most recent total annual payment of HK$0.35. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. S.A.S. Dragon 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.

We Could See S.A.S. Dragon Holdings' Dividend Growing

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that S.A.S. Dragon Holdings has grown earnings per share at 5.7% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Our Thoughts On S.A.S. Dragon Holdings' Dividend

Overall, we think that S.A.S. Dragon Holdings could make a reasonable income stock, even though it did cut the dividend this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for S.A.S. Dragon Holdings that investors need to be conscious of moving forward. Is S.A.S. Dragon 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.