Chow Sang Sang Holdings International's (HKG:116) Dividend Will Be Increased To HK$0.40

Chow Sang Sang Holdings International Limited (HKG:116) will increase its dividend from last year's comparable payment on the 20th of June to HK$0.40. This makes the dividend yield 9.6%, which is above the industry average.

View our latest analysis for Chow Sang Sang Holdings International

Chow Sang Sang Holdings International'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. Before making this announcement, Chow Sang Sang Holdings International was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 46.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of HK$0.68 in 2014 to the most recent total annual payment of HK$0.80. This means that it has been growing its distributions at 1.6% per annum 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.

Chow Sang Sang Holdings International May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Although it's important to note that Chow Sang Sang Holdings International's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. If Chow Sang Sang Holdings International is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Chow Sang Sang Holdings International's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. For instance, we've picked out 1 warning sign for Chow Sang Sang Holdings International that investors should take into consideration. Is Chow Sang Sang Holdings International 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.