Chen Hsong Holdings (HKG:57) Is Increasing Its Dividend To HK$0.12

Chen Hsong Holdings Limited (HKG:57) will increase its dividend on the 15th of September to HK$0.12. This takes the dividend yield from 5.8% to 5.8%, which shareholders will be pleased with.

Check out our latest analysis for Chen Hsong Holdings

Chen Hsong Holdings' Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Chen Hsong Holdings' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 48.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 41%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The first annual payment during the last 10 years was HK$0.12 in 2011, and the most recent fiscal year payment was HK$0.16. This implies that the company grew its distributions at a yearly rate of about 2.9% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

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. It's encouraging to see Chen Hsong Holdings has been growing its earnings per share at 49% a year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Chen Hsong Holdings Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Chen Hsong Holdings is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. Taking the debate a bit further, we've identified 1 warning sign for Chen Hsong Holdings that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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