Johnson Electric Holdings (HKG:179) Has Announced A Dividend Of $0.44

Johnson Electric Holdings Limited (HKG:179) has announced that it will pay a dividend of $0.44 per share on the 4th of September. This means the annual payment will be 2.9% of the current stock price, which is lower than the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Johnson Electric Holdings' stock price has increased by 44% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Johnson Electric Holdings' Future Dividends May Potentially Be At Risk

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Johnson Electric Holdings was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 1.0%. If the dividend continues along the path it has been on recently, the company could be paying out more than double what it is earning, which is definitely a bit high to be sustainable going forward.

Check out our latest analysis for Johnson Electric Holdings

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 $0.0288 in 2015 to the most recent total annual payment of $0.0778. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. Johnson Electric Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Johnson Electric Holdings has grown earnings per share at 52% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Johnson Electric Holdings Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Johnson Electric Holdings might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Johnson Electric Holdings (of which 1 is a bit unpleasant!) you should know about. Is Johnson Electric Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.