Dah Sing Financial Holdings (HKG:440) Is Increasing Its Dividend To HK$1.64

The board of Dah Sing Financial Holdings Limited (HKG:440) has announced that it will be paying its dividend of HK$1.64 on the 20th of June, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 9.3%, which is in line with the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Dah Sing Financial Holdings' stock price has increased by 32% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Dah Sing Financial Holdings

Dah Sing Financial Holdings' 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.

Dah Sing Financial Holdings has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Dah Sing Financial Holdings' payout ratio of 40% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 14.3% over the next 3 years. The future payout ratio could be 42% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of HK$1.22 in 2014 to the most recent total annual payment of HK$2.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.1% 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.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that Dah Sing Financial Holdings' earnings per share has fallen at approximately 2.7% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. 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 company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Dah Sing Financial Holdings that investors should take into consideration. Is Dah Sing Financial 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.