The board of Karrie International Holdings Limited (HKG:1050) has announced that it will be paying its dividend of HK$0.04 on the 24th of September, an increased payment from last year's comparable dividend. This takes the dividend yield to 6.6%, which shareholders will be pleased with.
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 Karrie International Holdings' stock price has increased by 51% 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 Karrie International Holdings
Karrie International Holdings' Earnings Easily Cover The Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite easily covered by Karrie International Holdings' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
If the company can't turn things around, EPS could fall by 5.5% over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 78% in the next 12 months which is on the higher end of the range we would say is sustainable.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was HK$0.012, compared to the most recent full-year payment of HK$0.055. This works out to be a compound annual growth rate (CAGR) of approximately 16% 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.
Dividend Growth Is Doubtful
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Karrie International Holdings has seen earnings per share falling at 5.5% per year over the last 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 Karrie International Holdings' Dividend
In summary, while it's always good to see the dividend being raised, we don't think Karrie International Holdings' payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Karrie International Holdings is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Karrie International Holdings you should be aware of, and 1 of them is significant. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com