Four Seas Mercantile Holdings (HKG:374) Is Due To Pay A Dividend Of HK$0.065

The board of Four Seas Mercantile Holdings Limited (HKG:374) has announced that it will pay a dividend of HK$0.065 per share on the 24th of September. The dividend yield is 3.8% based on this payment, which is a little bit low compared to the other companies in the industry.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Estimates Indicate Four Seas Mercantile Holdings' Could Struggle to Maintain Dividend Payments In The Future

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, the dividend made up 358% of earnings, and the company was generating negative free cash flows. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Over the next year, EPS could expand by 24.0% if the company continues along the path it has been on recently. If the dividend continues on its recent course, the payout ratio in 12 months could be 287%, which is a bit high and could start applying pressure to the balance sheet.

Check out our latest analysis for Four Seas Mercantile Holdings

Four Seas Mercantile Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. The payments haven't really changed that much since 10 years ago. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Could Be Constrained

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Four Seas Mercantile Holdings has seen EPS rising for the last five years, at 24% per annum. While EPS is growing rapidly, Four Seas Mercantile Holdings paid out a very high 358% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Four Seas Mercantile Holdings' payments, as there could be some issues with sustaining them into the future. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Four Seas Mercantile Holdings (of which 1 can't be ignored!) you should know about. Is Four Seas Mercantile Holdings 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.