TK Group (Holdings) Limited's (HKG:2283) investors are due to receive a payment of HK$0.04 per share on 26th of September. This takes the dividend yield to 6.0%, which shareholders will be pleased with.
Check out our latest analysis for TK Group (Holdings)
TK Group (Holdings)'s Dividend Is Well Covered By Earnings
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 TK Group (Holdings)'s earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
The next year is set to see EPS grow by 23.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 66% by next year, which is in a pretty sustainable range.
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$0.018, compared to the most recent full-year payment of HK$0.103. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
Dividend Growth Is Doubtful
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though TK Group (Holdings)'s EPS has declined at around 6.7% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.
Our Thoughts On TK Group (Holdings)'s Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 TK 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.