KPa-BM Holdings' (HKG:2663) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of KPa-BM Holdings Limited (HKG:2663) has announced that it will be paying its dividend of HK$0.08 on the 20th of September, an increased payment from last year's comparable dividend. This takes the dividend yield to 9.2%, which shareholders will be pleased with.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that KPa-BM Holdings' stock price has increased by 32% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for KPa-BM Holdings

KPa-BM Holdings' Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by KPa-BM Holdings' earnings. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to grow by 12.0% over the next year if recent trends continue. If recent patterns in the dividend continue, the payout ratio in 12 months could be 94% which is a bit high but can definitely be sustainable.

KPa-BM Holdings' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the annual payment back then was HK$0.015, compared to the most recent full-year payment of HK$0.04. This means that it has been growing its distributions at 13% 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. KPa-BM Holdings has seen EPS rising for the last five years, at 12% per annum. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

KPa-BM Holdings Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for KPa-BM Holdings you should be aware of, and 1 of them is a bit unpleasant. If you are a dividend investor, you might also want to look at our curated list of high yield 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.

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