Able Engineering Holdings (HKG:1627) Will Pay A Larger Dividend Than Last Year At HK$0.06

Able Engineering Holdings Limited (HKG:1627) has announced that it will be increasing its dividend from last year's comparable payment on the 26th of September to HK$0.06. This will take the annual payment to 8.8% of the stock price, which is above what most companies in the industry pay.

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Able Engineering Holdings' Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. 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.

If the trend of the last few years continues, EPS will grow by 57.0% over the next 12 months. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Able Engineering Holdings

Able Engineering Holdings' Dividend Has Lacked Consistency

It's comforting to see that Able Engineering Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2018, the annual payment back then was HK$0.05, compared to the most recent full-year payment of HK$0.06. This implies that the company grew its distributions at a yearly rate of about 2.6% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

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. It's encouraging to see that Able Engineering Holdings has been growing its earnings per share at 57% a year over the past five years. Able Engineering Holdings is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Able Engineering Holdings Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 2 warning signs for Able Engineering 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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