FSE Lifestyle Services (HKG:331) Is Due To Pay A Dividend Of HK$0.214

FSE Lifestyle Services Limited's (HKG:331) investors are due to receive a payment of HK$0.214 per share on 16th of December. This makes the dividend yield 7.6%, which is above the industry average.

View our latest analysis for FSE Lifestyle Services

FSE Lifestyle Services' Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite easily covered by FSE Lifestyle Services' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 26.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

FSE Lifestyle Services' Dividend Has Lacked Consistency

Looking back, FSE Lifestyle Services' dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 9 years was HK$0.10 in 2015, and the most recent fiscal year payment was HK$0.438. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year 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.

We Could See FSE Lifestyle Services' Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. FSE Lifestyle Services has seen EPS rising for the last five years, at 9.9% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

FSE Lifestyle Services Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. As an example, we've identified 1 warning sign for FSE Lifestyle Services that you should be aware of before investing. 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.