Hongryong Finance Limited (SGX:S41) investors will receive a payout of S$0.09 per share on May 24. This means the annual payout is his 5.0% of the current stock price, which is above the industry average.
Check out our latest analysis for Hongryong Finance.
Hongryong Finance's payout is expected to cover solid earnings
We want solid dividend yields, but we don't care if the payouts aren't sustainable.
Hongryong Finance has been paying dividends for at least 10 years and has a long history of paying out a portion of its earnings to shareholders. We calculate the company's dividend payout ratio based on the data from its last earnings report and find it to be 60%, which means Hong Leong Finance can pay its last dividend without putting pressure on its balance sheet.
If recent trends continue, EPS is expected to decline by 4.8% over the next twelve months. If the dividend continues on its recent trajectory, the future payout ratio could be 65%, which is definitely achievable.
Dividend volatility
The company has a long history of paying dividends, but it has cut its dividend at least once in the past 10 years. For the past 10 years, his annual payment was S$0.12 in 2014, and his most recent financial year payment was S$0.125. Dividends grew less than 1% per year during this period. While a modest increase in dividends is a good thing, we think this will be offset by historic payout reductions. If a company's earnings are not stable, it will be difficult to live off dividend income alone.
Dividend growth prospects are limited
Earnings per share growth could be a mitigating factor, given historical dividend movements. Over the past 5 years, Hong Leong Finance's EPS has been decreasing at around 4.8% per year. If a company's earnings decline over time, it stands to reason that its dividend payments must also be reduced.
Our thoughts on Hongryong Finance's dividends
In summary, cutting the dividend isn't ideal, but it can bring the payout into a more sustainable range. A low payout ratio is a redeeming feature, but in general we're not very happy with the payouts that Hong Leong Finance is making. Overall, I don't think this company has the makings of a high-yield stock.
Investors generally prefer companies with consistent and stable dividend policies over companies with irregular dividend policies. On the other hand, despite the importance of dividends, they are not the only factor that our readers need to know when evaluating a company. I took the discussion a little further and found the following: 1 warning sign for Hongryong Finance That means investors need to be conscious moving forward.Looking for more high-yield dividend ideas? Try ours A group of people with strong dividends.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
