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

The board of Goldpac Group Limited (HKG:3315) has announced that it will pay a dividend on the 30th of June, with investors receiving HK$0.14 per share. This means the annual payment is 8.5% of the current stock price, which is above the average for the industry.

See our latest analysis for Goldpac Group

Goldpac 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, Goldpac Group's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

EPS is set to fall by 7.4% over the next 12 months if recent trends continue. 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

Looking back, Goldpac Group's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2014, the first annual payment was CN¥0.038, compared to the most recent full-year payment of CN¥0.14. This means that it has been growing its distributions at 17% per annum 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.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Goldpac Group's EPS has declined at around 7.4% a year. 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.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Goldpac Group is earning enough to cover the payments, the cash flows are lacking. 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. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Goldpac Group (of which 2 make us uncomfortable!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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