Bank of East Asia (HKG:23) Has Announced A Dividend Of HK$0.18

The board of The Bank of East Asia, Limited (HKG:23) has announced that it will pay a dividend of HK$0.18 per share on the 8th of April. Even though the dividend went up, the yield is still quite low at only 5.4%.

Check out our latest analysis for Bank of East Asia

Bank of East Asia's Earnings Will Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

Bank of East Asia has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Bank of East Asia's last earnings report, the payout ratio is at a decent 41%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 60.9% over the next 3 years. Analysts estimate the future payout ratio will be 43% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was HK$1.06, compared to the most recent full-year payment of HK$0.54. Doing the maths, this is a decline of about 6.5% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Bank of East Asia has seen earnings per share falling at 8.4% per year over the last five years. 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. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Bank of East Asia's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Bank of East Asia's payments are rock solid. While Bank of East Asia is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Bank of East Asia that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection 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.