Dickson Concepts (International) Limited (HKG:113) will increase its dividend from last year's comparable payment on the 23rd of August to HK$0.35. This will take the dividend yield to an attractive 8.6%, 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
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Dickson Concepts (International) was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
Unless the company can turn things around, EPS could fall by 2.9% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 57%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of HK$0.31 in 2014 to the most recent total annual payment of HK$0.45. This works out to be a compound annual growth rate (CAGR) of approximately 3.8% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
Dickson Concepts (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. Over the past five years, it looks as though Dickson Concepts (International)'s EPS has declined at around 2.9% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.
In Summary
Overall, we always like to see the dividend being raised, but we don't think Dickson Concepts (International) will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Dickson Concepts (International) has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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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