Far East Horizon (HKG:3360) Is Increasing Its Dividend To CN¥0.50

Far East Horizon Limited (HKG:3360) has announced that it will be increasing its dividend from last year's comparable payment on the 28th of June to CN¥0.50. Based on this payment, the dividend yield for the company will be 8.5%, which is fairly typical for the industry.

See our latest analysis for Far East Horizon

Far East Horizon's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Far East Horizon was paying only paying out a fraction of earnings, but the payment was a massive 170% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

The next year is set to see EPS grow by 16.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 44%, which is in the range that makes us comfortable with the sustainability of the dividend.

Far East Horizon Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of CN¥0.181 in 2014 to the most recent total annual payment of CN¥0.459. This implies that the company grew its distributions at a yearly rate of about 9.7% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

We Could See Far East Horizon's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Far East Horizon has been growing its earnings per share at 7.0% a year over the past five years. Far East Horizon definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Far East Horizon's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Far East Horizon has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. 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.