Kato (Hong Kong) Holdings (HKG:2189) Will Pay A Larger Dividend Than Last Year At HK$0.025

Kato (Hong Kong) Holdings Limited's (HKG:2189) dividend will be increasing from last year's payment of the same period to HK$0.025 on 26th of August. This makes the dividend yield 7.9%, which is above the industry average.

Check out our latest analysis for Kato (Hong Kong) Holdings

Kato (Hong Kong) Holdings' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Kato (Hong Kong) Holdings was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 17.3% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.

Kato (Hong Kong) Holdings Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of HK$0.04 in 2019 to the most recent total annual payment of HK$0.05. This implies that the company grew its distributions at a yearly rate of about 7.7% over that duration. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Kato (Hong Kong) Holdings has impressed us by growing EPS at 17% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

We Really Like Kato (Hong Kong) Holdings' Dividend

Overall, a dividend increase is always good, and we think that Kato (Hong Kong) Holdings is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 2 warning signs for Kato (Hong Kong) Holdings that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.