China Leon Inspection Holding (HKG:1586) Is Increasing Its Dividend To HK$0.0269

China Leon Inspection Holding Limited's (HKG:1586) periodic dividend will be increasing on the 27th of October to HK$0.0269, with investors receiving 22% more than last year's HK$0.022. This takes the dividend yield to 3.2%, which shareholders will be pleased with.

Check out our latest analysis for China Leon Inspection Holding

China Leon Inspection Holding's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, China Leon Inspection Holding's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 23.2% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

China Leon Inspection Holding's Dividend Has Lacked Consistency

China Leon Inspection Holding has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the annual payment back then was HK$0.0212, compared to the most recent full-year payment of HK$0.0541. This means that it has been growing its distributions at 17% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. China Leon Inspection Holding has impressed us by growing EPS at 23% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like China Leon Inspection Holding's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for China Leon Inspection Holding that investors should take into consideration. Is China Leon Inspection Holding 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.