JOYY (NASDAQ:YY) Is Reducing Its Dividend To $0.1975
JOYY Inc.'s (NASDAQ:YY) dividend is being reduced from last year's payment covering the same period to $0.1975 on the 13th of October. However, the dividend yield of 2.1% is still a decent boost to shareholder returns.
View our latest analysis for JOYY
JOYY's Earnings Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, JOYY's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to fall by 54.3%. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 75%, meaning that most of the company's earnings are being paid out to shareholders.
JOYY's Dividend Has Lacked Consistency
Even in its short history, we have seen the dividend cut. The annual payment during the last 3 years was $1.24 in 2020, and the most recent fiscal year payment was $0.80. The dividend has fallen 35% over that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
JOYY May Find It Hard To Grow The Dividend
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. However, JOYY has only grown its earnings per share at 4.4% per annum over the past five years. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.
Our Thoughts On JOYY's Dividend
Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for JOYY you should be aware of, and 1 of them is concerning. 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.
