Analogue Holdings (HKG:1977) Is Paying Out A Larger Dividend Than Last Year

Analogue Holdings Limited (HKG:1977) has announced that it will be increasing its periodic dividend on the 29th of September to HK$0.0427, which will be 6.2% higher than last year's comparable payment amount of HK$0.0402. This will take the annual payment to 8.2% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Analogue Holdings

Analogue Holdings' Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite comfortably covered by Analogue Holdings' earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

If the trend of the last few years continues, EPS will grow by 10.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 72% by next year, which is in a pretty sustainable range.

Analogue Holdings Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The annual payment during the last 3 years was HK$0.077 in 2019, and the most recent fiscal year payment was HK$0.113. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Analogue Holdings has impressed us by growing EPS at 10% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Analogue Holdings' payments are rock solid. While Analogue Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Case in point: We've spotted 2 warning signs for Analogue Holdings (of which 1 doesn't sit too well with us!) 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.