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

The board of Hong Kong Finance Group Limited (HKG:1273) has announced that it will pay a dividend on the 6th of October, with investors receiving HK$0.013 per share. Based on this payment, the dividend yield will be 6.5%, which is fairly typical for the industry.

See our latest analysis for Hong Kong Finance Group

Hong Kong Finance Group's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, Hong Kong Finance Group's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 3.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 17% by next year, which we think can be pretty sustainable going forward.

Hong Kong Finance Group's Dividend Has Lacked Consistency

Hong Kong Finance Group has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of HK$0.028 in 2014 to the most recent total annual payment of HK$0.026. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Achieve

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 per share has been crawling upwards at 3.3% per year. If Hong Kong Finance Group is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Hong Kong Finance Group's Dividend

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. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Hong Kong Finance Group that you should be aware of before investing. Is Hong Kong Finance Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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