Public Financial Holdings (HKG:626) Will Pay A Larger Dividend Than Last Year At HK$0.05

Public Financial Holdings Limited (HKG:626) will increase its dividend on the 4th of August to HK$0.05. Based on the announced payment, the dividend yield for the company will be 6.7%, which is fairly typical for the industry.

See our latest analysis for Public Financial Holdings

Public Financial Holdings' Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last dividend was quite easily covered by Public Financial Holdings' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 1.3% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 49%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from HK$0.21 in 2011 to the most recent annual payment of HK$0.17. The dividend has shrunk at around 2.1% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Public Financial Holdings May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Unfortunately, Public Financial Holdings' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Public Financial Holdings' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Public Financial Holdings is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Public Financial Holdings that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

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