S-Enjoy Service Group Co., Limited (HKG:1755) will increase its dividend from last year's comparable payment on the 18th of July to CN¥0.2251. This makes the dividend yield about the same as the industry average at 6.9%.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that S-Enjoy Service Group's stock price has increased by 35% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
View our latest analysis for S-Enjoy Service Group
S-Enjoy Service Group's Dividend Is Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, S-Enjoy Service Group's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 26.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.
S-Enjoy Service Group's Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 5 years was CN¥0.10 in 2019, and the most recent fiscal year payment was CN¥0.205. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that S-Enjoy Service Group has grown earnings per share at 16% per year over the past five years. S-Enjoy Service Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We Really Like S-Enjoy Service Group's Dividend
Overall, a dividend increase is always good, and we think that S-Enjoy Service Group is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, S-Enjoy Service Group has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. 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.
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