Ocean One Holding Ltd. (HKG:8476) has announced that it will pay a dividend of HK$0.04 per share on the 13th of September. This means the annual payment will be 1.9% of the current stock price, which is lower than the industry average.
See our latest analysis for Ocean One Holding
Ocean One Holding's Payment Has Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Ocean One Holding was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share could rise by 10.3% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 28% by next year, which we think can be pretty sustainable going forward.
Ocean One Holding Doesn't Have A Long Payment History
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2018, the annual payment back then was HK$0.022, compared to the most recent full-year payment of HK$0.04. This means that it has been growing its distributions at 10% per annum over that time. Ocean One Holding has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Ocean One Holding has been growing its earnings per share at 10% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
We Really Like Ocean One Holding's Dividend
Overall, we like to see the dividend staying consistent, and we think Ocean One Holding might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Ocean One Holding that you should be aware of before investing. 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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