China Leon Inspection Holding (HKG:1586) Will Pay A Dividend Of HK$0.022

China Leon Inspection Holding Limited (HKG:1586) will pay a dividend of HK$0.022 on the 28th of October. Based on this payment, the dividend yield will be 2.3%, which is fairly typical for the industry.

See our latest analysis for China Leon Inspection Holding

China Leon Inspection Holding'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. However, prior to this announcement, China Leon Inspection Holding's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 2.7% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 46% by next year, which is in a pretty sustainable range.

China Leon Inspection Holding's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. 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$0.0233, compared to the most recent full-year payment of HK$0.0327. This works out to be a compound annual growth rate (CAGR) of approximately 7.0% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

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 has been rising at 2.7% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, China Leon Inspection Holding could always pay out a higher proportion of earnings to increase shareholder returns.

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. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for China Leon Inspection Holding that investors need to be conscious of moving forward. 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.