BOC Hong Kong (Holdings) (HKG:2388) Is Paying Out A Larger Dividend Than Last Year

The board of BOC Hong Kong (Holdings) Limited (HKG:2388) has announced that it will be paying its dividend of HK$1.42 on the 17th of July, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 5.5%.

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BOC Hong Kong (Holdings)'s Payment Expected To Have Solid Earnings Coverage

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

Having distributed dividends for at least 10 years, BOC Hong Kong (Holdings) has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 55%, which means that BOC Hong Kong (Holdings) would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 10.0% over the next 3 years. The future payout ratio could be 58% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

View our latest analysis for BOC Hong Kong (Holdings)

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 2015, the annual payment back then was HK$1.12, compared to the most recent full-year payment of HK$1.99. This means that it has been growing its distributions at 5.9% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

BOC Hong Kong (Holdings) May Find It Hard To Grow The Dividend

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. However, BOC Hong Kong (Holdings) has only grown its earnings per share at 3.5% per annum over the past five years. The company has been growing at a pretty soft 3.5% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On BOC Hong Kong (Holdings)'s Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for BOC Hong Kong (Holdings) that you should be aware of before investing. Is BOC Hong Kong (Holdings) 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.