The board of Chu Kong Shipping Enterprises (Group) Company Limited (HKG:560) has announced that it will pay a dividend of HK$0.04 per share on the 26th of June. This payment takes the dividend yield to 9.9%, which only provides a modest boost to overall returns.
Chu Kong Shipping Enterprises (Group)'s Future Dividend Projections Appear Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Chu Kong Shipping Enterprises (Group)'s dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, EPS could fall by 11.4% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 58%, which is definitely feasible to continue.
View our latest analysis for Chu Kong Shipping Enterprises (Group)
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from HK$0.11 total annually to HK$0.08. The dividend has shrunk at around 3.1% 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 Has Limited Growth Potential
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Chu Kong Shipping Enterprises (Group)'s earnings per share has shrunk at 11% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.
Our Thoughts On Chu Kong Shipping Enterprises (Group)'s 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 be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Chu Kong Shipping Enterprises (Group) (1 makes us a bit uncomfortable!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.