Wecon Holdings' (HKG:1793) Dividend Will Be HK$0.012

Wecon Holdings Limited's (HKG:1793) investors are due to receive a payment of HK$0.012 per share on 10th of September. This payment means that the dividend yield will be 6.6%, which is around the industry average.

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Wecon Holdings' Future Dividends May Potentially Be At Risk

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, Wecon Holdings' profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

If the company can't turn things around, EPS could fall by 31.9% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 179%, which is definitely a bit high to be sustainable going forward.

Check out our latest analysis for Wecon Holdings

Wecon Holdings' Dividend Has Lacked Consistency

It's comforting to see that Wecon Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 6 years was HK$0.014 in 2019, and the most recent fiscal year payment was HK$0.012. The dividend has shrunk at around 2.5% a year during that period. 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. Over the past five years, it looks as though Wecon Holdings' EPS has declined at around 32% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Wecon Holdings (of which 1 doesn't sit too well with us!) you should know about. Is Wecon Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.