Topsports International Holdings' (HKG:6110) Dividend Will Be Reduced To CN¥0.1503

Simply Wall St · 07/02 22:20

Topsports International Holdings Limited (HKG:6110) has announced that on 27th of August, it will be paying a dividend ofCN¥0.1503, which a reduction from last year's comparable dividend. This means the annual payment is 9.8% of the current stock price, which is above the average for the industry.

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Topsports International Holdings' Projections Indicate Future Payments May Be Unsustainable

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Topsports International Holdings' dividend made up quite a large proportion of earnings but only 51% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Earnings per share is forecast to rise by 34.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 107%, which probably can't continue without putting some pressure on the balance sheet.

historic-dividend
SEHK:6110 Historic Dividend July 2nd 2025

View our latest analysis for Topsports International Holdings

Topsports International Holdings' Dividend Has Lacked Consistency

Looking back, Topsports International Holdings' dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2019, the dividend has gone from CN¥0.24 total annually to CN¥0.28. This means that it has been growing its distributions at 2.6% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Topsports International Holdings' EPS has declined at around 13% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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 be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Topsports International Holdings that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.