EuroEyes International Eye Clinic's (HKG:1846) Shareholders Will Receive A Smaller Dividend Than Last Year

EuroEyes International Eye Clinic Limited (HKG:1846) has announced that on 27th of June, it will be paying a dividend ofHK$0.0297, which a reduction from last year's comparable dividend. Based on this payment, the dividend yield will be 2.1%, which is lower than the average for the industry.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

EuroEyes International Eye Clinic's Payment Could Potentially Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, EuroEyes International Eye Clinic's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 19.4% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for EuroEyes International Eye Clinic

EuroEyes International Eye Clinic's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2021, the annual payment back then was HK$0.0299, compared to the most recent full-year payment of HK$0.0698. This means that it has been growing its distributions at 24% per annum over that time. EuroEyes International Eye Clinic has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that EuroEyes International Eye Clinic has grown earnings per share at 19% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for EuroEyes International Eye Clinic's prospects of growing its dividend payments in the future.

We Really Like EuroEyes International Eye Clinic's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like EuroEyes International Eye Clinic does. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

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. Taking the debate a bit further, we've identified 1 warning sign for EuroEyes International Eye Clinic that investors need to be conscious of moving forward. Is EuroEyes International Eye Clinic not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.