Dream International (HKG:1126) Is Due To Pay A Dividend Of HK$0.25

Dream International Limited's (HKG:1126) investors are due to receive a payment of HK$0.25 per share on 13th of October. Based on this payment, the dividend yield for the company will be 4.2%, which is fairly typical for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Dream International's stock price has increased by 149% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Dream International's Future Dividend Projections Appear Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Dream International was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

If the trend of the last few years continues, EPS will grow by 11.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 66% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Dream International

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from HK$0.08 total annually to HK$0.60. This means that it has been growing its distributions at 22% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Dream International has seen EPS rising for the last five years, at 11% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Our Thoughts On Dream International's Dividend

Overall, we always like to see the dividend being raised, but we don't think Dream International will make a great income stock. While Dream International is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Dream International (1 is potentially serious!) that you should be aware of before investing. 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.