Goldpac Group's (HKG:3315) Dividend Is Being Reduced To CN¥0.055

Goldpac Group Limited's (HKG:3315) dividend is being reduced from last year's payment covering the same period to CN¥0.055 on the 27th of June. The dividend yield of 6.1% is still a nice boost to shareholder returns, despite the cut.

Our free stock report includes 4 warning signs investors should be aware of before investing in Goldpac Group. Read for free now.

Goldpac Group's Future Dividends May Potentially Be At Risk

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before this announcement, Goldpac Group was paying out 81% of earnings, but a comparatively small 18% of free cash flows. This leaves plenty of cash for reinvestment into the business.

If the company can't turn things around, EPS could fall by 21.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 111%, which could put the dividend in jeopardy if the company's earnings don't improve.

Check out our latest analysis for Goldpac Group

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of CN¥0.08 in 2015 to the most recent total annual payment of CN¥0.051. The dividend has shrunk at around 4.4% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

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. Earnings per share has been sinking by 22% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 4 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.