Able Engineering Holdings (HKG:1627) Is Increasing Its Dividend To HK$0.035

The board of Able Engineering Holdings Limited (HKG:1627) has announced that it will be paying its dividend of HK$0.035 on the 27th of September, an increased payment from last year's comparable dividend. This makes the dividend yield 9.2%, which is above the industry average.

See our latest analysis for Able Engineering Holdings

Able Engineering Holdings' Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Able Engineering Holdings' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, EPS could fall by 1.2% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 48%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Able Engineering Holdings' Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2018, the annual payment back then was HK$0.05, compared to the most recent full-year payment of HK$0.035. Doing the maths, this is a decline of about 8.5% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Achieve

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Able Engineering Holdings hasn't seen much change in its earnings per share over the last five years.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Able Engineering 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. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Able Engineering Holdings has 3 warning signs (and 1 which is a bit concerning) we think you should know about. 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.