Techtronic Industries (HKG:669) Is Increasing Its Dividend To HK$1.00

The board of Techtronic Industries Company Limited (HKG:669) has announced that it will be increasing its dividend on the 17th of June to HK$1.00. Despite this raise, the dividend yield of 1.4% is only a modest boost to shareholder returns.

See our latest analysis for Techtronic Industries

Techtronic Industries Is Paying Out More Than It Is Earning

Even a low dividend yield can be attractive if it is sustained for years on end. Techtronic Industries is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 19.7%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was US$0.013 in 2012, and the most recent fiscal year payment was US$0.24. This implies that the company grew its distributions at a yearly rate of about 34% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

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 Techtronic Industries has been growing its earnings per share at 22% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On Techtronic Industries' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Techtronic Industries is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Techtronic Industries that investors need to be conscious of moving forward. Is Techtronic Industries 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.