Highway Holdings (NASDAQ:HIHO) Has Announced A Dividend Of $0.05

Highway Holdings Limited's (NASDAQ:HIHO) investors are due to receive a payment of $0.05 per share on 24th of December. This makes the dividend yield 3.5%, which will augment investor returns quite nicely.

See our latest analysis for Highway Holdings

Highway Holdings Might Find It Hard To Continue The Dividend

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Highway Holdings is unprofitable despite paying a dividend, and it is paying out 104% of its free cash flow. This makes us feel that the dividend will be hard to maintain.

Recent, EPS has fallen by 38.4%, so this could continue over the next year. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from $0.16 total annually to $0.07. This works out to be a decline of approximately 7.9% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Earnings per share has been sinking by 38% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

We're Not Big Fans Of Highway Holdings' Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Highway Holdings make more consistent payments in the future. 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. Overall, this doesn't get us very excited from an income standpoint.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for Highway Holdings (of which 3 are potentially serious!) 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.