PC Partner Group's (HKG:1263) Dividend Will Be HK$0.20

PC Partner Group Limited's (HKG:1263) investors are due to receive a payment of HK$0.20 per share on 24th of July. The dividend yield of 7.9% is still a nice boost to shareholder returns, despite the cut.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that PC Partner Group's stock price has increased by 68% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for PC Partner Group

PC Partner Group Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 191% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 4.4%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

EPS is set to fall by 25.0% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 322%, which could put the dividend in jeopardy if the company's earnings don't improve.

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. Since 2014, the dividend has gone from HK$0.065 total annually to HK$0.40. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though PC Partner Group's EPS has declined at around 25% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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 would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for PC Partner Group that investors need to be conscious of moving forward. 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.

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