TK Group (Holdings)'s (HKG:2283) Dividend Will Be Reduced To HK$0.028

TK Group (Holdings) Limited's (HKG:2283) dividend is being reduced from last year's payment covering the same period to HK$0.028 on the 28th of September. This means the annual payment is 6.2% of the current stock price, which is above the average for the industry.

Check out our latest analysis for TK Group (Holdings)

TK Group (Holdings)'s Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. 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.

Looking forward, earnings per share is forecast to rise by 102.0% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

TK Group (Holdings)'s Dividend Has Lacked Consistency

TK Group (Holdings) has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2014, the dividend has gone from HK$0.018 total annually to HK$0.114. This implies that the company grew its distributions at a yearly rate of about 26% over that duration. 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.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. TK Group (Holdings) hasn't seen much change in its earnings per share over the last five years.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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 would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. 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.