BOC Hong Kong (Holdings)'s (HKG:2388) Dividend Will Be Increased To HK$0.91

BOC Hong Kong (Holdings) Limited (HKG:2388) has announced that it will be increasing its dividend from last year's comparable payment on the 14th of July to HK$0.91. Despite this raise, the dividend yield of 5.7% is only a modest boost to shareholder returns.

See our latest analysis for BOC Hong Kong (Holdings)

BOC Hong Kong (Holdings)'s Dividend Forecasted To Be Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

BOC Hong Kong (Holdings) has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on BOC Hong Kong (Holdings)'s last earnings report, the payout ratio is at a decent 53%, 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 40.2% over the next 3 years. Analysts forecast the future payout ratio could be 49% over the same time horizon, which is a number we think the company can maintain.

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. The annual payment during the last 10 years was HK$1.1 in 2013, and the most recent fiscal year payment was HK$1.36. This implies that the company grew its distributions at a yearly rate of about 2.1% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that BOC Hong Kong (Holdings)'s earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. 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. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for BOC Hong Kong (Holdings) that you should be aware of before investing. 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.