Guoco Group (HKG:53) Is Increasing Its Dividend To $2.90

Guoco Group Limited (HKG:53) will increase its dividend from last year's comparable payment on the 3rd of December to $2.90. This takes the annual payment to 4.4% of the current stock price, which unfortunately is below what the industry is paying.

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Guoco Group's Future Dividends May Potentially Be At Risk

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Guoco Group's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 35.1% if the company continues along the path it has been on recently. Assuming the dividend continues along recent trends, we think the payout ratio could reach 158%, which probably can't continue without starting to put some pressure on the balance sheet.

View our latest analysis for Guoco Group

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was $0.511 in 2015, and the most recent fiscal year payment was $0.45. This works out to be a decline of approximately 1.3% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Guoco Group has been growing its earnings per share at 35% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Guoco Group Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Guoco Group is a strong income stock thanks to its track record and growing earnings. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Guoco Group that you should be aware of before investing. 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.