Ten Pao Group Holdings' (HKG:1979) Shareholders Will Receive A Smaller Dividend Than Last Year

Ten Pao Group Holdings Limited (HKG:1979) is reducing its dividend from last year's comparable payment to HK$0.033 on the 5th of July. However, the dividend yield of 4.8% is still a decent boost to shareholder returns.

View our latest analysis for Ten Pao Group Holdings

Ten Pao Group Holdings' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Ten Pao Group Holdings' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 71.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 14%, which is in the range that makes us comfortable with the sustainability of the dividend.

Ten Pao Group Holdings' Dividend Has Lacked Consistency

Ten Pao Group Holdings has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of HK$0.02 in 2016 to the most recent total annual payment of HK$0.061. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Ten Pao Group Holdings has grown earnings per share at 13% 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 Ten Pao Group Holdings' Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Ten Pao Group Holdings does. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Ten Pao Group 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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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.