Hong Kong Finance Group (HKG:1273) Will Pay A Dividend Of HK$0.013

The board of Hong Kong Finance Group Limited (HKG:1273) has announced that it will pay a dividend on the 7th of October, with investors receiving HK$0.013 per share. This makes the dividend yield 6.8%, which will augment investor returns quite nicely.

View our latest analysis for Hong Kong Finance Group

Hong Kong Finance Group's Dividend Forecasted To Be Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having paid out dividends for 8 years, Hong Kong Finance Group has a good history of paying out a part of its earnings to shareholders. While past data isn't a guarantee for the future, Hong Kong Finance Group's latest earnings report puts its payout ratio at 15%, showing that the company can pay out its dividends comfortably.

Over the next year, EPS could expand by 8.8% if recent trends continue. Assuming the dividend continues along recent trends, we think the future payout ratio could be 13% by next year, which is in a pretty sustainable range.

Hong Kong Finance Group's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2014, the annual payment back then was HK$0.028, compared to the most recent full-year payment of HK$0.026. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

We Could See Hong Kong Finance Group's Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Hong Kong Finance Group has seen EPS rising for the last five years, at 8.8% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Hong Kong Finance Group Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Hong Kong Finance Group that investors should take into consideration. Is Hong Kong Finance Group 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.