K. Wah International Holdings (HKG:173) Is Due To Pay A Dividend Of HK$0.05

The board of K. Wah International Holdings Limited (HKG:173) has announced that it will pay a dividend on the 31st of July, with investors receiving HK$0.05 per share. This means that the dividend yield is 5.2%, which is a bit low when comparing to other companies in the industry.

We've discovered 3 warning signs about K. Wah International Holdings. View them for free.

K. Wah International Holdings' Projections Indicate Future Payments May Be Unsustainable

If it is predictable over a long period, even low dividend yields can be attractive. Before this announcement, K. Wah International Holdings was paying out 85% of earnings, but a comparatively small of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS is forecast to fall by 41.4%. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 145%, which is definitely a bit high to be sustainable going forward.

See our latest analysis for K. Wah 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 dividend has gone from an annual total of HK$0.15 in 2015 to the most recent total annual payment of HK$0.09. This works out to be a decline of approximately 5.0% 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been sinking by 36% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Our Thoughts On K. Wah International Holdings' Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. 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 would probably look elsewhere for an income investment.

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. Case in point: We've spotted 3 warning signs for K. Wah International Holdings (of which 1 is a bit unpleasant!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.