Chen Hsong Holdings' (HKG:57) Shareholders Will Receive A Bigger Dividend Than Last Year

Chen Hsong Holdings Limited (HKG:57) has announced that it will be increasing its dividend from last year's comparable payment on the 22nd of September to HK$0.08. This will take the annual payment to 7.2% of the stock price, which is above what most companies in the industry pay.

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Chen Hsong Holdings' Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Chen Hsong Holdings' earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 10.5% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 49%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Chen Hsong Holdings

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was HK$0.018 in 2015, and the most recent fiscal year payment was HK$0.118. This means that it has been growing its distributions at 21% 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Chen Hsong Holdings has grown earnings per share at 11% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

We Really Like Chen Hsong Holdings' Dividend

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. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Chen Hsong Holdings (1 can't be ignored!) that you should be aware of before investing. Is Chen Hsong Holdings 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.