Dragon Crown Group Holdings (HKG: 935) expected to pay HK $ 0.018 dividend
Dragon Crown Group Holdings Limited (HKG: 935) will pay a dividend of HK $ 0.018 on October 12. The dividend yield will be 4.3% based on this payment which is still above the industry average.
See our latest analysis for Dragon Crown Group Holdings
Dragon Crown Group Holdings payout has strong earnings coverage
We like to see robust dividend yields, but it doesn’t matter if the payout isn’t sustainable. The last dividend was fairly easily covered by the profits of Dragon Crown Group Holdings. This indicates that a large portion of the profits are reinvested in the business, with the aim of fueling growth.
EPS is expected to decline 0.4% over the next 12 months if recent trends continue. If the dividend continues on the same path it has been recently, we estimate that the payout ratio could be 64%, which is entirely possible to continue.
Dragon Crown Group Holdings dividend lacks consistency
Even in its relatively short history, the company has cut the dividend at least once. If the company cuts once, that is certainly not an argument against the possibility of it cutting in the future. The first annual payment in the past 9 years was HK $ 0.05 in 2012, and the most recent year’s payment was HK $ 0.048. Dividend payments have declined at a rate of less than 1% per annum during this period. In general, we don’t like to see a dividend that goes down over time, as this can degrade shareholder returns and indicate that the company may be in trouble.
Prospects for dividend growth are limited
Growth in earnings per share could be a mitigating factor considering past dividend fluctuations. Unfortunately, Dragon Crown Group Holdings’ earnings per share have been essentially flat over the past five years, which means the dividend may not be increased every year.
In summary, while it is good to see that the dividend has not been reduced, we are a little cautious about the payments from Dragon Crown Group Holdings as there could be issues maintaining them going forward. In the past, payments have been volatile, but in the short term the dividend could be reliable as the company generates enough cash to cover it. We would be a little cautious if we were relying on this security primarily for dividend income.
Market movements testify to the high value of a coherent dividend policy compared to a more unpredictable one. Meanwhile, despite the importance of dividend payments, they aren’t the only factors our readers should be aware of when valuing a business. Taking the debate a little further, we identified 1 warning sign for Dragon Crown Group Holdings that investors need to be aware of moving forward. If you are a dividend investor, you can also view our curated list of high performing dividend stocks.
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