The board of Keck Seng Investments (Hong Kong) Limited (HKG:184) has announced that it will pay a dividend of HK$0.05 per share on the 31st of October. This makes the dividend yield 4.9%, which is above the industry average.
View our latest analysis for Keck Seng Investments (Hong Kong)
Keck Seng Investments (Hong Kong)'s Payment Has Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Keck Seng Investments (Hong Kong) 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.
If the trend of the last few years continues, EPS will grow by 8.0% over the next 12 months. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from HK$0.18 total annually to HK$0.10. The dividend has shrunk at around 5.7% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.
Keck Seng Investments (Hong Kong) Could Grow Its Dividend
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Keck Seng Investments (Hong Kong) has impressed us by growing EPS at 8.0% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Keck Seng Investments (Hong Kong)'s prospects of growing its dividend payments in the future.
In Summary
Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 3 warning signs for Keck Seng Investments (Hong Kong) that investors should take into consideration. 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.