Dah Sing Financial Holdings' (HKG:440) Shareholders Will Receive A Bigger Dividend Than Last Year

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. This makes the dividend yield about the same as the industry average at 9.9%.

Check out our latest analysis for Dah Sing Financial Holdings

Dah Sing Financial Holdings' Dividend Forecasted To Be Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Having distributed dividends for at least 10 years, Dah Sing Financial Holdings has a long history of paying out a part of its 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. Analysts forecast the future payout ratio could be 42% 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 2014, the dividend has gone from HK$1.22 total annually to HK$2.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.1% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Dah Sing Financial Holdings' EPS has declined at around 2.7% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Dah Sing Financial Holdings' payments are rock solid. While Dah Sing Financial Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

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. For example, we've picked out 1 warning sign for Dah Sing Financial Holdings that investors should know about before committing capital to this stock. 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.