Hong Kong Finance Group (HKG:1273) Has Announced A Dividend Of HK$0.013

Hong Kong Finance Group Limited (HKG:1273) has announced that it will pay a dividend of HK$0.013 per share on the 6th of October. Including this payment, the dividend yield on the stock will be 5.2%, which is a modest boost for shareholders' returns.

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 Hong Kong Finance Group's stock price has increased by 32% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Hong Kong Finance Group

Hong Kong Finance Group's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Hong Kong Finance Group was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 3.3% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 17% by next year, which is in a pretty sustainable range.

Hong Kong Finance Group's Dividend Has Lacked Consistency

Looking back, Hong Kong Finance Group's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2014, the dividend has gone from HK$0.028 total annually to HK$0.026. 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.

Hong Kong Finance Group May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings has been rising at 3.3% per annum over the last five years, which admittedly is a bit slow. While EPS growth is quite low, Hong Kong Finance Group has the option to increase the payout ratio to return more cash to shareholders.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Hong Kong Finance Group that investors need to be conscious of moving forward. 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.