Ten Pao Group Holdings Limited (HKG:1979) will pay a dividend of HK$0.052 on the 25th of October. This will take the dividend yield to an attractive 9.8%, providing a nice boost to shareholder returns.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Ten Pao Group Holdings' stock price has increased by 37% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
View our latest analysis for Ten Pao Group Holdings
Ten Pao Group Holdings' Future Dividend Projections Appear Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite comfortably covered by Ten Pao Group Holdings' earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.
Over the next year, EPS is forecast to expand by 40.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 34%, which is in the range that makes us comfortable with the sustainability of the dividend.
Ten Pao Group Holdings' Dividend Has Lacked Consistency
Looking back, Ten Pao Group Holdings' dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2015, the annual payment back then was HK$0.02, compared to the most recent full-year payment of HK$0.148. This means that it has been growing its distributions at 25% per annum over that time. 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.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Ten Pao Group Holdings has seen EPS rising for the last five years, at 19% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think Ten Pao Group Holdings' payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Ten Pao Group Holdings has been making. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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. Is Ten Pao Group Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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