The board of Bestway Global Holding Inc. (HKG:3358) has announced that it will be increasing its dividend on the 7th of July to HK$0.10. Although the dividend is now higher, the yield is only 3.5%, which is below the industry average.
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 Bestway Global Holding's stock price has increased by 37% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Bestway Global Holding Doesn't Earn Enough To Cover Its Payments
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Bestway Global Holding's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
The next 12 months is set to see EPS grow by 12.4%. However, if the dividend continues growing along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 243% over the next year.
Bestway Global Holding's Dividend Has Lacked Consistency
The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2018, the dividend has gone from US$0.013 to US$0.013. The dividend has shrunk at a rate of less than 1% a year over this period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend Looks Likely To Grow
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Bestway Global Holding has impressed us by growing EPS at 17% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Bestway Global Holding 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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 3 warning signs for Bestway Global Holding that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.
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