The board of Dah Sing Financial Holdings Limited (HKG:440) has announced that it will pay a dividend on the 18th of June, with investors receiving HK$1.18 per share. This means that the annual payment will be 7.6% of the current stock price, which is in line with the average for the industry.
We've discovered 1 warning sign about Dah Sing Financial Holdings. View them for free.Dah Sing Financial Holdings' Payment Expected To Have Solid Earnings Coverage
Solid dividend yields are great, but they only really help us if the payment is sustainable.
Dah Sing Financial Holdings has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Dah Sing Financial Holdings' last earnings report, the payout ratio is at a decent 40%, 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 expand by 25.8%. Analysts forecast the future payout ratio could be 44% over the same time horizon, which is a number we think the company can maintain.
View our latest analysis for Dah Sing Financial Holdings
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of HK$1.25 in 2015 to the most recent total annual payment of HK$2.10. This means that it has been growing its distributions at 5.3% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Dah Sing Financial Holdings might have put its house in order since then, but we remain cautious.
The Dividend's Growth Prospects Are Limited
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. 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.
In Summary
In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While Dah Sing Financial Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.
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. As an example, we've identified 1 warning sign for Dah Sing Financial Holdings 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.