Johnson Electric Holdings (HKG:179) Has Announced That It Will Be Increasing Its Dividend To $0.44

Johnson Electric Holdings Limited (HKG:179) has announced that it will be increasing its dividend from last year's comparable payment on the 4th of September to $0.44. Based on this payment, the dividend yield for the company will be 5.3%, which is fairly typical for the industry.

See our latest analysis for Johnson Electric Holdings

Johnson Electric Holdings Doesn't Earn Enough To Cover Its Payments

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Johnson Electric Holdings was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to fall by 0.7%. Assuming the dividend continues along recent trends, we believe the payout ratio could reach over 200%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was $0.0592 in 2014, and the most recent fiscal year payment was $0.0782. This works out to be a compound annual growth rate (CAGR) of approximately 2.8% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Johnson Electric Holdings' EPS has declined at around 5.2% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On Johnson Electric Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Johnson Electric Holdings' payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Johnson Electric Holdings (of which 1 doesn't sit too well with us!) 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.

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