SH Group (Holdings) (HKG:1637) Is Increasing Its Dividend To HK$0.039

SH Group (Holdings) Limited (HKG:1637) will increase its dividend on the 15th of September to HK$0.039. This will take the annual payment from 7.2% to 7.2% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for SH Group (Holdings)

SH Group (Holdings)'s Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, SH Group (Holdings)'s earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 8.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

SH Group (Holdings)'s Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2018, the dividend has gone from HK$0.022 to HK$0.039. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. SH Group (Holdings) has seen EPS rising for the last five years, at 8.3% per annum. SH Group (Holdings) definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like SH Group (Holdings)'s Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 3 warning signs for SH Group (Holdings) that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.

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