Bank of East Asia's (HKG:23) Shareholders Will Receive A Smaller Dividend Than Last Year

The Bank of East Asia, Limited (HKG:23) is reducing its dividend from last year's comparable payment to HK$0.17 on the 29th of March. Based on this payment, the dividend yield will be 3.1%, which is lower than the average for the industry.

Check out our latest analysis for Bank of East Asia

Bank of East Asia's Dividend Forecasted To Be Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive.

Having distributed dividends for at least 10 years, Bank of East Asia has a long history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, Bank of East Asia's payout ratio sits at 25%, an extremely comfortable number that shows that it can pay its dividend.

The next 3 years are set to see EPS grow by 68.6%. Analysts forecast the future payout ratio could be 43% over the same time horizon, which is a number we think the company can maintain.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of HK$0.94 in 2013 to the most recent total annual payment of HK$0.33. The dividend has shrunk at around 9.9% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Bank of East Asia May Find It Hard To Grow The Dividend

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Bank of East Asia has seen earnings per share falling at 4.2% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While Bank of East Asia is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Bank of East Asia is a great stock to add to your portfolio if income is your focus.

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 example, we've picked out 1 warning sign for Bank of East Asia that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.