The board of Keck Seng Investments (Hong Kong) Limited (HKG:184) has announced that it will pay a dividend on the 26th of June, with investors receiving HK$0.07 per share. However, the dividend yield of 5.0% is still a decent boost to shareholder returns.
Keck Seng Investments (Hong Kong)'s 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. However, Keck Seng Investments (Hong Kong)'s earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
If the trend of the last few years continues, EPS will grow by 115.4% over the next 12 months. If the dividend continues on this path, the payout ratio could be 6.9% by next year, which we think can be pretty sustainable going forward.
Check out our latest analysis for Keck Seng Investments (Hong Kong)
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of HK$0.18 in 2015 to the most recent total annual payment of HK$0.12. The dividend has shrunk at around 4.0% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Keck Seng Investments (Hong Kong) has impressed us by growing EPS at 115% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
We Really Like Keck Seng Investments (Hong Kong)'s Dividend
In general, we don't like to see the dividend being cut, especially when the company has such high potential like Keck Seng Investments (Hong Kong) does. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.
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. As an example, we've identified 2 warning signs for Keck Seng Investments (Hong Kong) that you should be aware of before investing. 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.