Truly International Holdings (HKG:732) Has Affirmed Its Dividend Of HK$0.05

The board of Truly International Holdings Limited (HKG:732) has announced that it will pay a dividend of HK$0.05 per share on the 1st of December. The dividend yield will be 8.3% based on this payment which is still above the industry average.

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Truly International Holdings' Projections Indicate Future Payments May Be Unsustainable

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 117% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only . Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

EPS is set to fall by 16.8% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 136%, which could put the dividend under pressure if earnings don't start to improve.

See our latest analysis for Truly International Holdings

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was HK$0.15 in 2015, and the most recent fiscal year payment was HK$0.10. This works out to be a decline of approximately 4.0% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Truly International Holdings' earnings per share has shrunk at 17% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Truly International Holdings' payments, as there could be some issues with sustaining them into the future. 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. We don't think Truly International Holdings is a great stock to add to your portfolio if income is your focus.

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. To that end, Truly International Holdings has 4 warning signs (and 2 which are potentially serious) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.