Ten Pao Group Holdings Limited (HKG:1979) will pay a dividend of HK$0.052 on the 25th of October. This takes the dividend yield to 9.4%, which shareholders will be pleased with.
See our latest analysis for Ten Pao Group Holdings
Ten Pao Group Holdings' Dividend Is Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Ten Pao Group Holdings 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.
Over the next year, EPS could expand by 19.3% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 40% by next year, which is in a pretty sustainable range.
Ten Pao Group Holdings' Dividend Has Lacked Consistency
Looking back, Ten Pao Group Holdings' dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2016, the dividend has gone from HK$0.02 total annually to HK$0.124. This implies that the company grew its distributions at a yearly rate of about 26% over that duration. 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
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. Ten Pao Group Holdings has impressed us by growing EPS at 19% per 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 Ten Pao Group Holdings' Dividend
Overall, a dividend increase is always good, and we think that Ten Pao Group Holdings is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. 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 Ten Pao Group Holdings that investors should know about before committing capital to this stock. 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.