K. Wah International Holdings (HKG:173) Is Paying Out Less In Dividends Than Last Year

K. Wah International Holdings Limited (HKG:173) is reducing its dividend to HK$0.02 on the 27th of Octoberwhich is 50% less than last year's comparable payment of HK$0.04. Based on this payment, the dividend yield will be 4.0%, which is lower than the average for the industry.

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K. Wah International Holdings' Projected Earnings Seem Likely To Cover Future Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, K. Wah International Holdings' dividend made up quite a large proportion of earnings but only 8.7% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to fall by 17.0%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 89%, which is definitely on the higher side.

See our latest analysis for K. Wah International Holdings

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from HK$0.15 total annually to HK$0.09. This works out to be a decline of approximately 5.0% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. K. Wah International Holdings' earnings per share has shrunk at 41% a year over the past 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

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for K. Wah International Holdings (1 is potentially serious!) that you should be aware of before investing. Is K. Wah International 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.