Keck Seng Investments (Hong Kong) (HKG:184) Is Paying Out A Larger Dividend Than Last Year

Keck Seng Investments (Hong Kong) Limited (HKG:184) will increase its dividend from last year's comparable payment on the 27th of June to HK$0.08. This takes the dividend yield to 6.7%, which shareholders will be pleased with.

View our latest analysis for Keck Seng Investments (Hong Kong)

Keck Seng Investments (Hong Kong)'s Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, Keck Seng Investments (Hong Kong)'s dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 2.2% over the next 12 months. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of HK$0.20 in 2014 to the most recent total annual payment of HK$0.16. Doing the maths, this is a decline of about 2.2% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings have grown at around 2.2% a year for the past five years, which isn't massive but still better than seeing them shrink. If Keck Seng Investments (Hong Kong) is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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 Keck Seng Investments (Hong Kong) that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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