Accel Group Holdings (HKG:1283) Has Announced That It Will Be Increasing Its Dividend To HK$0.014

Accel Group Holdings Limited (HKG:1283) will increase its dividend on the 20th of October to HK$0.014, which is 7.7% higher than last year's payment from the same period of HK$0.013. Although the dividend is now higher, the yield is only 1.2%, which is below the industry average.

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 Accel Group Holdings' stock price has increased by 75% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Accel Group Holdings' Future Dividend Projections Appear Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Accel Group Holdings was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 11.3% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 33%, which we are pretty comfortable with and we think is feasible on an earnings basis.

See our latest analysis for Accel Group Holdings

Accel Group Holdings' Dividend Has Lacked Consistency

It's comforting to see that Accel Group Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of HK$0.032 in 2020 to the most recent total annual payment of HK$0.02. Doing the maths, this is a decline of about 9.0% per year. 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.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Accel Group Holdings' earnings per share has shrunk at 11% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Our Thoughts On Accel Group Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Accel Group Holdings' payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Accel Group 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Accel Group Holdings that investors should know about before committing capital to this stock. 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.