Hong Kong Finance Group (HKG:1273) Has Re-Affirmed Its Dividend Of HK$0.013

The board of Hong Kong Finance Group Limited (HKG:1273) has announced that it will pay a dividend of HK$0.013 per share on the 8th of October. The dividend yield will be 5.1% based on this payment which is still above the industry average.

See our latest analysis for Hong Kong Finance Group

Hong Kong Finance Group's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Hong Kong Finance Group's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 8.8% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 12% by next year, which we think can be pretty sustainable going forward.

Hong Kong Finance Group's Dividend Has Lacked Consistency

It's comforting to see that Hong Kong Finance Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2014, the dividend has gone from HK$0.028 to HK$0.026. Doing the maths, this is a decline of about 1.1% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Growth Potential

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. Hong Kong Finance Group has seen EPS rising for the last five years, at 8.8% per annum. Hong Kong Finance Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Hong Kong Finance Group Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Hong Kong Finance Group might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

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 instance, we've picked out 2 warning signs for Hong Kong Finance Group that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list 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.
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