Eagle Nice (International) Holdings (HKG:2368) Is Increasing Its Dividend To HK$0.12

Eagle Nice (International) Holdings Limited's (HKG:2368) dividend will be increasing to HK$0.12 on 15th of September. This will take the dividend yield from 8.3% to 8.3%, providing a nice boost to shareholder returns.

Check out our latest analysis for Eagle Nice (International) Holdings

Eagle Nice (International) Holdings' Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before this announcement, Eagle Nice (International) Holdings was paying out 71% of earnings, but a comparatively small 67% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Over the next year, EPS could expand by 18.7% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 71%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was HK$0.20 in 2011, and the most recent fiscal year payment was HK$0.42. This implies that the company grew its distributions at a yearly rate of about 7.7% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Eagle Nice (International) Holdings has seen EPS rising for the last five years, at 19% per annum. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

We Really Like Eagle Nice (International) Holdings' Dividend

Overall, a dividend increase is always good, and we think that Eagle Nice (International) Holdings is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Eagle Nice (International) Holdings that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.

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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.
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