SH Group (Holdings) (HKG:1637) Is Paying Out A Larger Dividend Than Last Year

The board of SH Group (Holdings) Limited (HKG:1637) has announced that it will be increasing its dividend on the 15th of September to HK$0.039. This makes the dividend yield 14%, which is above the industry average.

See our latest analysis for SH Group (Holdings)

SH Group (Holdings)'s Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, SH Group (Holdings)'s earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 8.3% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 65% by next year, which is in a pretty sustainable range.

SH Group (Holdings)'s Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The first annual payment during the last 3 years was HK$0.022 in 2018, and the most recent fiscal year payment was HK$0.039. This means that it has been growing its distributions at 21% per annum 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.

We Could See SH Group (Holdings)'s Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. SH Group (Holdings) has impressed us by growing EPS at 8.3% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like SH Group (Holdings)'s Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Taking the debate a bit further, we've identified 2 warning signs for SH Group (Holdings) that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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