Smart-Core Holdings (HKG:2166) Is Paying Out Less In Dividends Than Last Year

Smart-Core Holdings Limited (HKG:2166) has announced that on 28th of June, it will be paying a dividend ofHK$0.05, which a reduction from last year's comparable dividend. This means that the annual payment will be 3.8% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Smart-Core Holdings

Smart-Core Holdings' Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Smart-Core Holdings was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 1.3% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 38%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Smart-Core Holdings' Dividend Has Lacked Consistency

Smart-Core Holdings has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of HK$0.04 in 2017 to the most recent total annual payment of HK$0.05. This means that it has been growing its distributions at 3.2% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Smart-Core Holdings May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Although it's important to note that Smart-Core Holdings' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Smart-Core Holdings that investors need to be conscious of moving forward. Is Smart-Core Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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