The board of Pico Far East Holdings Limited (HKG:752) has announced that it will be increasing its dividend by 57% on the 21st of May to HK$0.11, up from last year's comparable payment of HK$0.07. This takes the annual payment to 6.3% of the current stock price, which is about average for the industry.
See our latest analysis for Pico Far East Holdings
Pico Far East Holdings' Payment Could Potentially Have Solid Earnings Coverage
Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by Pico Far East Holdings' earnings. This means that a large portion of its earnings are being retained to grow the business.
Over the next year, EPS could expand by 6.8% if recent trends continue. If the dividend continues on this path, the payout ratio could be 52% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of HK$0.10 in 2015 to the most recent total annual payment of HK$0.13. This means that it has been growing its distributions at 2.7% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
The Dividend Has Growth Potential
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Pico Far East Holdings has grown earnings per share at 6.8% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
Our Thoughts On Pico Far East Holdings' Dividend
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Pico Far East Holdings 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.