Precious Dragon Technology Holdings' (HKG:1861) Dividend Will Be HK$0.0219

Precious Dragon Technology Holdings Limited (HKG:1861) will pay a dividend of HK$0.0219 on the 8th of July. This means that the dividend yield is 3.2%, which is a bit low when comparing to other companies in the industry.

We've discovered 4 warning signs about Precious Dragon Technology Holdings. View them for free.

Precious Dragon Technology Holdings' Future Dividend Projections Appear Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, Precious Dragon Technology Holdings' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 1.8% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 28%, which we are pretty comfortable with and we think is feasible on an earnings basis.

View our latest analysis for Precious Dragon Technology Holdings

Precious Dragon Technology Holdings' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. The annual payment during the last 6 years was HK$0.028 in 2019, and the most recent fiscal year payment was HK$0.0361. This works out to be a compound annual growth rate (CAGR) of approximately 4.3% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Precious Dragon Technology Holdings May Find It Hard To Grow The Dividend

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. Unfortunately, Precious Dragon Technology Holdings' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 4 warning signs for Precious Dragon Technology Holdings that investors need to be conscious of moving forward. 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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