Goldpac Group (HKG:3315) Is Due To Pay A Dividend Of HK$0.14

The board of Goldpac Group Limited (HKG:3315) has announced that it will pay a dividend of HK$0.14 per share on the 30th of June. This makes the dividend yield 7.8%, which will augment investor returns quite nicely.

View our latest analysis for Goldpac Group

Goldpac Group Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite easily covered by Goldpac Group's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 7.4% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 108%, which could put the dividend under pressure if earnings don't start to improve.

Goldpac Group's Dividend Has Lacked Consistency

Looking back, Goldpac Group's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The dividend has gone from CN¥0.038 in 2014 to the most recent annual payment of CN¥0.14. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, Goldpac Group's earnings per share has shrunk at approximately 7.4% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Goldpac Group's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Just as an example, we've come across 2 warning signs for Goldpac Group you should be aware of, and 1 of them makes us a bit uncomfortable. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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