Transport International Holdings (HKG:62) Has Announced A Dividend Of HK$0.50

Transport International Holdings Limited's (HKG:62) investors are due to receive a payment of HK$0.50 per share on 30th of June. The dividend yield will be 4.7% based on this payment which is still above the industry average.

Check out our latest analysis for Transport International Holdings

Transport International Holdings Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the dividend made up 164% of earnings, and the company was generating negative free cash flows. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

EPS is set to fall by 32.0% 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 202%, which is definitely a bit high to be sustainable going forward.

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$0.60 in 2013, and the most recent fiscal year payment was HK$0.50. Doing the maths, this is a decline of about 1.8% per year. 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Transport International Holdings' EPS has fallen by approximately 32% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Transport International Holdings' Dividend Doesn't Look Great

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. The dividend doesn't inspire confidence that it will provide solid income in the future.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 5 warning signs for Transport International Holdings (2 are a bit concerning!) that you should be aware of before investing. Is Transport International Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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