First Pacific's (HKG:142) Upcoming Dividend Will Be Larger Than Last Year's

First Pacific Company Limited (HKG:142) has announced that it will be increasing its dividend on the 8th of July to HK$0.10. This makes the dividend yield 6.2%, which is above the industry average.

Check out our latest analysis for First Pacific

First Pacific Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by First Pacific's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next 12 months is set to see EPS grow by 83.0%. If the dividend continues on its recent course, the payout ratio in 12 months could be 181%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2012, the first annual payment was US$0.026, compared to the most recent full-year payment of US$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.

The Dividend Looks Likely To Grow

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. It's encouraging to see First Pacific has been growing its earnings per share at 21% a year over the past five years. First Pacific is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

First Pacific Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, First Pacific 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.