Precious Dragon Technology Holdings Limited (HKG:1861) is reducing its dividend to HK$0.0142 on the 29th of Octoberwhich is 17% less than last year's comparable payment of HK$0.0172. Based on this payment, the dividend yield will be 2.8%, which is lower than the average for the industry.
See our latest analysis for Precious Dragon Technology Holdings
Precious Dragon Technology Holdings' Payment Has Solid Earnings Coverage
If it is predictable over a long period, even low dividend yields can be attractive. However, Precious Dragon Technology Holdings' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
If the trend of the last few years continues, EPS will grow by 8.2% over the next 12 months. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.
Precious Dragon Technology Holdings' Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. Since 2019, the dividend has gone from HK$0.028 total annually to HK$0.0536. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
We Could See Precious Dragon Technology Holdings' Dividend Growing
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. Precious Dragon Technology Holdings has impressed us by growing EPS at 8.2% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Precious Dragon Technology Holdings' prospects of growing its dividend payments in the future.
Precious Dragon Technology Holdings Looks Like A Great Dividend Stock
Overall, we think that Precious Dragon Technology Holdings could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All in all, this checks a lot of the boxes we look for when choosing an income stock.
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 Precious Dragon Technology Holdings 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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