LH Group's (HKG:1978) Dividend Will Be Increased To HK$0.0777

LH Group Limited (HKG:1978) will increase its dividend from last year's comparable payment on the 27th of June to HK$0.0777. This takes the dividend yield to 6.5%, which shareholders will be pleased with.

Check out our latest analysis for LH Group

LH Group'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. The last payment made up 80% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

EPS is set to grow by 21.1% over the next year if recent trends continue. If recent patterns in the dividend continue, the payout ratio in 12 months could be 76% which is a bit high but can definitely be sustainable.

LH Group's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The annual payment during the last 4 years was HK$0.054 in 2019, and the most recent fiscal year payment was HK$0.0777. This implies that the company grew its distributions at a yearly rate of about 9.5% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

LH Group's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. LH Group has seen EPS rising for the last five years, at 21% per annum. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which LH Group hasn't been doing.

Our Thoughts On LH Group's Dividend

Overall, we always like to see the dividend being raised, but we don't think LH Group will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for LH Group that investors should take into consideration. Is LH Group 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.