Hai Leck Holdings (SGX:BLH) Will Pay A Dividend Of SGD0.02

Hai Leck Holdings Limited (SGX:BLH) will pay a dividend of SGD0.02 on the 17th of November. The dividend yield will be 5.1% based on this payment which is still above the industry average.

Check out our latest analysis for Hai Leck Holdings

Hai Leck Holdings' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

Over the next year, EPS could expand by 25.8% if the company continues along the path it has been on recently. If recent patterns in the dividend continue, the payout ratio in 12 months could be 81% which is a bit high but can definitely be sustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was SGD0.0364 in 2013, and the most recent fiscal year payment was SGD0.02. The dividend has shrunk at around 5.8% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Hai Leck Holdings' Dividend Might Lack Growth

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Hai Leck Holdings has seen EPS rising for the last five years, at 26% per annum. Although earnings per share is up nicely Hai Leck Holdings is paying out 106% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

Hai Leck Holdings' Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We don't think Hai Leck 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, Hai Leck Holdings has 5 warning signs (and 3 which can't be ignored) 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.