Ocean One Holding's (HKG:8476) Upcoming Dividend Will Be Larger Than Last Year's

The board of Ocean One Holding Ltd. (HKG:8476) has announced that it will be increasing its dividend by 32% on the 9th of September to HK$0.033. This will take the annual payment from 4.2% to 4.2% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Ocean One Holding

Ocean One Holding's Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Ocean One Holding was paying a whopping 169% as a dividend, but this only made up 25% of its overall earnings. 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.

If the trend of the last few years continues, EPS will grow by 10.2% over the next 12 months. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.

Ocean One Holding Is Still Building Its Track Record

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 dividend has gone from HK$0.022 in 2018 to the most recent annual payment of HK$0.033. This means that it has been growing its distributions at 11% per annum over that time. Ocean One Holding 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Ocean One Holding has seen EPS rising for the last five years, at 10% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Ocean One Holding's prospects of growing its dividend payments in the future.

Our Thoughts On Ocean One Holding's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Ocean One Holding's payments are rock solid. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Ocean One Holding that investors should know about before committing capital to this stock. Is Ocean One Holding 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.