Dah Sing Banking Group (HKG:2356) Is Increasing Its Dividend To HK$0.49

Dah Sing Banking Group Limited (HKG:2356) will increase its dividend on the 20th of June to HK$0.49, which is 69% higher than last year's payment from the same period of HK$0.29. This makes the dividend yield about the same as the industry average at 7.2%.

See our latest analysis for Dah Sing Banking Group

Dah Sing Banking Group's Earnings Will Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Dah Sing Banking Group has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While past data isn't a guarantee for the future, Dah Sing Banking Group's latest earnings report puts its payout ratio at 21%, showing that the company can pay out its dividends comfortably.

Looking forward, EPS is forecast to rise by 20.2% over the next 3 years. The future payout ratio could be 45% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from HK$0.31 total annually to HK$0.40. This implies that the company grew its distributions at a yearly rate of about 2.6% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth Is Doubtful

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. It's not great to see that Dah Sing Banking Group's earnings per share has fallen at approximately 5.6% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Dah Sing Banking Group's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Dah Sing Banking Group's payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Dah Sing Banking Group has been making. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Dah Sing Banking Group 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.