The board of Dickson Concepts (International) Limited (HKG:113) has announced that the dividend on 23rd of August will be increased to HK$0.35, which will be 30% higher than last year's payment of HK$0.27 which covered the same period. This will take the dividend yield to an attractive 6.8%, providing a nice boost to shareholder returns.
View our latest analysis for Dickson Concepts (International)
Dickson Concepts (International)'s Dividend Is Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained. However, Dickson Concepts (International)'s earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, EPS could fall by 2.9% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 56%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from HK$0.31 total annually to HK$0.37. This means that it has been growing its distributions at 1.8% 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.
The Dividend's Growth Prospects Are Limited
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that Dickson Concepts (International)'s earnings per share has fallen at approximately 2.9% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.
Our Thoughts On Dickson Concepts (International)'s Dividend
In summary, while it's always good to see the dividend being raised, we don't think Dickson Concepts (International)'s payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Dickson Concepts (International) you should be aware of, and 1 of them is potentially serious. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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