Chow Sang Sang Holdings International Limited (HKG:116) has announced that it will be increasing its dividend from last year's comparable payment on the 20th of June to HK$0.40. This will take the annual payment to 9.8% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for Chow Sang Sang Holdings International
Chow Sang Sang Holdings International's Earnings Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Chow Sang Sang Holdings International's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 46.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was HK$0.68, compared to the most recent full-year payment of HK$0.80. This works out to be a compound annual growth rate (CAGR) of approximately 1.6% a year 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.
Chow Sang Sang Holdings International May Find It Hard To Grow The Dividend
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Although it's important to note that Chow Sang Sang Holdings International's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While growth may be thin on the ground, Chow Sang Sang Holdings International could always pay out a higher proportion of earnings to increase shareholder returns.
In Summary
Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Chow Sang Sang Holdings International that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.