Ten Pao Group Holdings (HKG:1979) Will Pay A Larger Dividend Than Last Year At HK$0.056

The board of Ten Pao Group Holdings Limited (HKG:1979) has announced that it will be increasing its dividend by 1.8% on the 15th of August to HK$0.056. This will take the annual payment from 5.9% to 5.9% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Ten Pao Group Holdings

Ten Pao Group Holdings' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Ten Pao Group Holdings' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 18.9% over the next year. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

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 makes us cautious about the consistency of the dividend over a full economic cycle. Since 2016, the dividend has gone from HK$0.02 to HK$0.11. This means that it has been growing its distributions at 33% per annum over that time. 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

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. Ten Pao Group Holdings has seen EPS rising for the last five years, at 14% per annum. Ten Pao Group Holdings definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Ten Pao Group Holdings will make a great income stock. While Ten Pao Group Holdings is earning enough to cover the payments, the cash flows are lacking. We don't think Ten Pao Group Holdings is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 1 warning sign 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.