Taste Gourmet Group's (HKG:8371) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Taste Gourmet Group Limited (HKG:8371) has announced that it will be paying its dividend of HK$0.052 on the 24th of August, an increased payment from last year's comparable dividend. This makes the dividend yield 6.9%, which is above the industry average.

Check out our latest analysis for Taste Gourmet Group

Taste Gourmet Group's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Taste Gourmet Group's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS could expand by 115.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

Taste Gourmet Group's Dividend Has Lacked Consistency

Looking back, Taste Gourmet Group's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of HK$0.022 in 2018 to the most recent total annual payment of HK$0.10. This means that it has been growing its distributions at 35% per annum over that time. Taste Gourmet Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

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. Taste Gourmet Group has seen EPS rising for the last five years, at 115% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Taste Gourmet Group could prove to be a strong dividend payer.

We Really Like Taste Gourmet Group's Dividend

Overall, a dividend increase is always good, and we think that Taste Gourmet Group is a strong income stock thanks to its track record and growing earnings. 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.

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. For instance, we've picked out 3 warning signs for Taste Gourmet Group that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.