Dah Sing Financial Holdings' (HKG:440) Dividend Will Be Increased To HK$0.36

The board of Dah Sing Financial Holdings Limited (HKG:440) has announced that it will be increasing its dividend by 9.1% on the 21st of September to HK$0.36, up from last year's comparable payment of HK$0.33. Despite this raise, the dividend yield of 6.5% is only a modest boost to shareholder returns.

See our latest analysis for Dah Sing Financial Holdings

Dah Sing Financial Holdings' Earnings Will Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end.

Dah Sing Financial Holdings has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Dah Sing Financial Holdings' last earnings report, the payout ratio is at a decent 30%, 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 21.6% over the next 3 years. Analysts forecast the future payout ratio could be 33% over the same time horizon, which is a number we think the company can maintain.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from HK$1.18 total annually to HK$1.14. Payments have been decreasing at a very slow pace in this time period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Dah Sing Financial Holdings has seen earnings per share falling at 4.1% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Dah Sing Financial Holdings' Dividend

Overall, we always like to see the dividend being raised, but we don't think Dah Sing Financial Holdings will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Dah Sing Financial Holdings has been making. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Dah Sing Financial Holdings that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.