TK Group (Holdings) (HKG:2283) Has Announced That It Will Be Increasing Its Dividend To HK$0.054

TK Group (Holdings) Limited (HKG:2283) has announced that it will be increasing its dividend on the 15th of September to HK$0.054. This takes the dividend yield from 4.4% to 4.4%, which shareholders will be pleased with.

Check out our latest analysis for TK Group (Holdings)

TK Group (Holdings)'s Earnings Easily Cover the Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, TK Group (Holdings)'s earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 24.3%. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

TK Group (Holdings)'s Dividend Has Lacked Consistency

It's comforting to see that TK Group (Holdings) has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2014, the first annual payment was HK$0.018, compared to the most recent full-year payment of HK$0.13. This works out to be a compound annual growth rate (CAGR) of approximately 33% a year over that time. TK Group (Holdings) has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

TK Group (Holdings) Could Grow Its Dividend

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. TK Group (Holdings) has seen EPS rising for the last five years, at 7.7% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On TK Group (Holdings)'s Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 1 warning sign for TK 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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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.
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