Dah Sing Financial Holdings Limited (HKG:440) has announced that it will pay a dividend of HK$1.18 per share on the 18th of June. However, the dividend yield of 9.0% still remains in a typical range for the industry.
Dah Sing Financial Holdings' Dividend Forecasted To Be Well Covered By Earnings
Solid dividend yields are great, but they only really help us if the payment is sustainable.
Dah Sing Financial Holdings has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Dah Sing Financial Holdings' last earnings report, the payout ratio is at a decent 46%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Over the next 3 years, EPS is forecast to fall by 99.9%. However, as estimated by analysts, the future payout ratio could be 44% over the same time period, which we think the company can easily maintain.
View our latest analysis for Dah Sing Financial Holdings
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was HK$1.22 in 2015, and the most recent fiscal year payment was HK$2.56. This works out to be a compound annual growth rate (CAGR) of approximately 7.7% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
Dah Sing Financial Holdings May Find It Hard To Grow The Dividend
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. Although it's important to note that Dah Sing Financial Holdings' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.
Dah Sing Financial Holdings' Dividend Doesn't Look Sustainable
Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. This company is not in the top tier of income providing stocks.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Dah Sing Financial Holdings that investors need to be conscious of moving forward. 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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