Greentown Service Group's (HKG:2869) Dividend Will Be Increased To HK$0.20

By
Simply Wall St
Published
May 27, 2021
SEHK:2869
Source: Shutterstock

The board of Greentown Service Group Co. Ltd. (HKG:2869) has announced that it will be increasing its dividend on the 13th of July to HK$0.20. This takes the dividend yield from 1.0% to 1.7%, which shareholders will be pleased with.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Greentown Service Group's stock price has increased by 51% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Greentown Service Group

Greentown Service Group's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Greentown Service Group's earnings. This means that a large portion of its earnings are being retained to grow the business.

Earnings per share is forecast to rise by 32.2% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 79%. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

historic-dividend
SEHK:2869 Historic Dividend May 28th 2021

Greentown Service Group Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The first annual payment during the last 4 years was CN¥0.035 in 2017, and the most recent fiscal year payment was CN¥0.099. This means that it has been growing its distributions at 29% per annum over that time. Greentown Service Group has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see Greentown Service Group has been growing its earnings per share at 19% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We'd also point out that Greentown Service Group has issued stock equal to 10% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Greentown Service Group Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 3 warning signs for Greentown Service Group that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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