Guoco Group (HKG:53) Has Affirmed Its Dividend Of HK$0.50

Guoco Group Limited (HKG:53) has announced that it will pay a dividend of HK$0.50 per share on the 23rd of March. This means the annual payment will be 2.8% of the current stock price, which is lower than the industry average.

Check out our latest analysis for Guoco Group

Guoco Group's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Guoco Group was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 17.6% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 27%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the dividend has gone from HK$2.70 total annually to HK$2.00. The dividend has shrunk at around 3.0% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 18% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Guoco Group has 3 warning signs (and 1 which can't be ignored) we think you should know about. Is Guoco Group 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.