China Electronics Huada Technology Company Limited (HKG:85) will increase its dividend from last year's comparable payment on the 31st of July to HK$0.105. This will take the dividend yield to an attractive 8.2%, providing a nice boost to shareholder returns.
See our latest analysis for China Electronics Huada Technology
China Electronics Huada Technology's Earnings Easily Cover The Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, China Electronics Huada Technology's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
If the trend of the last few years continues, EPS will grow by 43.4% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of HK$0.03 in 2014 to the most recent total annual payment of HK$0.105. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
The Dividend Looks Likely To Grow
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. It's encouraging to see that China Electronics Huada Technology has been growing its earnings per share at 43% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
China Electronics Huada Technology Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
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. For example, we've picked out 1 warning sign for China Electronics Huada Technology that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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