BOC Hong Kong (Holdings)'s (HKG:2388) Dividend Will Be Increased To HK$1.15

BOC Hong Kong (Holdings) Limited (HKG:2388) will increase its dividend from last year's comparable payment on the 15th of July to HK$1.15. This makes the dividend yield about the same as the industry average at 7.4%.

View our latest analysis for BOC Hong Kong (Holdings)

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

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

BOC Hong Kong (Holdings) has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on BOC Hong Kong (Holdings)'s last earnings report, the payout ratio is at a decent 54%, 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 17.5% over the next 3 years. Analysts estimate the future payout ratio will be 56% over the same time period, which is in the range that makes us comfortable with the sustainability 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 annual payment back then was HK$1.01, compared to the most recent full-year payment of HK$1.67. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, BOC Hong Kong (Holdings)'s EPS was effectively flat over the past five years, which could stop the company from paying more every year. Growth of 0.4% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

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

In summary, it's great to see that the company can raise the dividend and keep it 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for BOC Hong Kong (Holdings) that investors should take into consideration. 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.