Goldpac Group's (HKG:3315) Dividend Will Be HK$0.14

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 means the annual payment is 7.7% of the current stock price, which is above the average for the industry.

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. Based on the last payment, Goldpac Group was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, EPS could fall by 7.4% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 108%, which is definitely a bit high to be sustainable going forward.

Goldpac Group's Dividend Has Lacked Consistency

Goldpac Group has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from CN¥0.038 in 2014 to the most recent annual payment of CN¥0.14. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. 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.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Goldpac Group has seen earnings per share falling at 7.4% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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. 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. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Goldpac Group you should be aware of, and 1 of them is a bit unpleasant. Is Goldpac Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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