The board of Precious Dragon Technology Holdings Limited (HKG:1861) has announced that it will pay a dividend on the 8th of July, with investors receiving HK$0.0219 per share. This payment takes the dividend yield to 4.4%, which only provides a modest boost to overall returns.
Precious Dragon Technology Holdings' Payment Could Potentially Have Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Precious Dragon Technology Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Looking forward, EPS could fall by 1.8% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 28%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Check out our latest analysis for Precious Dragon Technology Holdings
Precious Dragon Technology Holdings' Dividend Has Lacked Consistency
It's comforting to see that Precious Dragon Technology Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2019, the annual payment back then was HK$0.028, compared to the most recent full-year payment of HK$0.0361. This means that it has been growing its distributions at 4.3% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
Precious Dragon Technology Holdings May Find It Hard To Grow The Dividend
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Precious Dragon Technology Holdings' EPS was effectively flat over the past five years, which could stop the company from paying more every year.
Our Thoughts On Precious Dragon Technology Holdings' Dividend
Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 3 warning signs for Precious Dragon Technology Holdings that you should be aware of before investing. Is Precious Dragon Technology Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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