Best Linking Group Holdings (HKG:8617) Has Announced A Dividend Of HK$0.02

Best Linking Group Holdings Limited (HKG:8617) has announced that it will pay a dividend of HK$0.02 per share on the 12th of December. Based on this payment, the dividend yield will be 3.1%, which is fairly typical for the industry.

Check out the opportunities and risks within the HK Machinery industry.

Best Linking Group Holdings' Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Best Linking Group Holdings was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

If the trend of the last few years continues, EPS will grow by 70.3% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

Best Linking Group Holdings' Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2020, the annual payment back then was HK$0.02, compared to the most recent full-year payment of HK$0.04. This means that it has been growing its distributions at 41% per annum over that time. Best Linking Group Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Best Linking Group Holdings has seen EPS rising for the last three years, at 70% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Best Linking Group Holdings' payments, as there could be some issues with sustaining them into the future. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think Best Linking Group Holdings is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 2 warning signs for Best Linking Group Holdings that investors need to be conscious of moving forward. Is Best Linking Group 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.