BOC Hong Kong (Holdings)'s (HKG:2388) Dividend Will Be Increased To HK$0.527

The board of BOC Hong Kong (Holdings) Limited (HKG:2388) has announced that it will be increasing its dividend by 18% on the 29th of September to HK$0.527, up from last year's comparable payment of HK$0.447. Despite this raise, the dividend yield of 6.2% is only a modest boost to shareholder returns.

Check out our latest analysis for BOC Hong Kong (Holdings)

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

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

BOC Hong Kong (Holdings) has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but BOC Hong Kong (Holdings)'s payout ratio of 48% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 18.8%. The future payout ratio could be 51% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

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$1.24 in 2013 to the most recent total annual payment of HK$1.36. Its dividends have grown at less than 1% per annum over this time frame. 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.

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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, BOC Hong Kong (Holdings)'s earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. The company has been growing at a pretty soft 0.1% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

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

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for BOC Hong Kong (Holdings) that investors need to be conscious of moving forward. 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.