TK Group (Holdings) (HKG:2283) Will Pay A Dividend Of HK$0.028

TK Group (Holdings) Limited's (HKG:2283) investors are due to receive a payment of HK$0.028 per share on 27th of September. This makes the dividend yield 8.9%, which will augment investor returns quite nicely.

Check out our latest analysis for TK Group (Holdings)

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

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, TK Group (Holdings) was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 70.9%. If the dividend continues on this path, the payout ratio could be 26% by next year, which we think can be pretty sustainable going forward.

TK Group (Holdings)'s Dividend Has Lacked Consistency

Looking back, TK Group (Holdings)'s dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of HK$0.018 in 2014 to the most recent total annual payment of HK$0.114. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth Is Doubtful

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that TK Group (Holdings)'s earnings per share has fallen at approximately 7.6% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On TK Group (Holdings)'s Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about TK Group (Holdings)'s payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think TK 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. As an example, we've identified 1 warning sign for TK Group (Holdings) that you should be aware of before investing. Is TK Group (Holdings) not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.