Hong Kong Shanghai Alliance Holdings' (HKG:1001) Dividend Will Be HK$0.015

Hong Kong Shanghai Alliance Holdings Limited's (HKG:1001) investors are due to receive a payment of HK$0.015 per share on 12th of September. This makes the dividend yield about the same as the industry average at 8.0%.

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Hong Kong Shanghai Alliance Holdings' Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Hong Kong Shanghai Alliance Holdings' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 49.3% over the next 12 months. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Hong Kong Shanghai Alliance Holdings

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 2015, the dividend has gone from HK$0.083 total annually to HK$0.033. This works out to be a decline of approximately 8.8% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. It's encouraging to see that Hong Kong Shanghai Alliance Holdings has been growing its earnings per share at 49% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Hong Kong Shanghai Alliance Holdings' Dividend

Overall, a dividend increase is always good, and we think that Hong Kong Shanghai Alliance Holdings is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Hong Kong Shanghai Alliance Holdings (of which 1 is concerning!) you should know about. Is Hong Kong Shanghai Alliance 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.