Chen Hsong Holdings Limited (HKG: 57) the dividend will increase to HK $ 0.052 on January 12. This results in the dividend yield being 5.7%, which is above the industry average.
Check out our latest analysis for Chen Hsong Holdings
Chen Hsong Holdings’ profits easily cover distributions
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 Chen Hsong Holdings. This indicates that a large portion of the profits are reinvested in the business, with the aim of fueling growth.
Looking ahead, earnings per share could increase by 37.5% over the next year if the trend of recent years continues. If the dividend continues according to recent trends, we estimate that the payout ratio will be 39%, which is within the range that puts us at ease with the sustainability of the dividend.
Although the company has a long history of dividends, it has been cut at least once in the past 10 years. Since 2011, the dividend has increased from HK $ 0.27 to HK $ 0.17. The dividend has decreased by approximately 4.7% per annum during this period. As a general rule, 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.
The dividend seems likely to increase
Since the dividend has been reduced in the past, we need to check if profits are increasing and if this could lead to higher dividends in the future. We are encouraged to see that Chen Hsong Holdings has increased its earnings per share by 38% per year over the past five years. The company has no problem growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock.
We really like the dividend from Chen Hsong Holdings
Overall, we think it could be an attractive income stock, and it’s only getting better by paying a higher dividend this year. Distributions are quite easily covered by profits, which are also converted into cash flow. All of these factors taken into account, we believe this has strong potential as a dividend-paying stock.
It is important to note that companies with a consistent dividend policy will generate greater investor confidence than those with an erratic policy. At the same time, there are other factors that our readers should be aware of before investing any capital in a stock. Taking the debate a little further, we identified 1 warning sign for Chen Hsong 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.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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