Asia Allied Infrastructure Holdings (HKG:711) Will Pay A Larger Dividend Than Last Year At HK$0.0113

The board of Asia Allied Infrastructure Holdings Limited (HKG:711) has announced that it will be increasing its dividend by 69% on the 5th of January to HK$0.0113, up from last year's comparable payment of HK$0.0067. This takes the annual payment to 4.2% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Asia Allied Infrastructure Holdings

Asia Allied Infrastructure Holdings' Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, Asia Allied Infrastructure Holdings' earnings easily 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 3.5% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 30%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was HK$0.014, compared to the most recent full-year payment of HK$0.0218. This works out to be a compound annual growth rate (CAGR) of approximately 4.5% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Asia Allied Infrastructure Holdings May Find It Hard To Grow The Dividend

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 not great to see that Asia Allied Infrastructure Holdings' earnings per share has fallen at approximately 3.5% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On Asia Allied Infrastructure Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Asia Allied Infrastructure Holdings' payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 4 warning signs for Asia Allied Infrastructure Holdings (of which 2 don't sit too well with us!) you should know about. Is Asia Allied Infrastructure Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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