Times Neighborhood Holdings Limited's (HKG:9928) dividend will be increasing to HK$0.086 on 2nd of July. This takes the annual payment to 1.6% of the current stock price, which is about average for the industry.
Times Neighborhood Holdings' Earnings Easily Cover the Distributions
Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Times Neighborhood Holdings was paying only paying out a fraction of earnings, but the payment was a massive 172% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
The next year is set to see EPS grow by 66.5%. If the dividend continues on this path, the payout ratio could be 21% by next year, which we think can be pretty sustainable going forward.
Times Neighborhood Holdings Doesn't Have A Long Payment History
Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.
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. Times Neighborhood Holdings' earnings per share is up 92% on last year. It's nice to see earnings per share rising, but one year is too short a period to get excited about. Were this trend to continue, we'd be interested. 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. Any one year of performance can be misleading for a variety of reasons, so we wouldn't like to form any strong conclusions based on these numbers alone.
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Times Neighborhood Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Times Neighborhood Holdings that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
If you're looking for stocks to buy, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted
This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.