Precious Dragon Technology Holdings' (HKG:1861) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Precious Dragon Technology Holdings Limited (HKG:1861) has announced that it will be paying its dividend of HK$0.0364 on the 8th of July, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 2.8%, which is below the industry average.

View our latest analysis for Precious Dragon Technology Holdings

Precious Dragon Technology Holdings' Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Precious Dragon Technology Holdings' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 6.5% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. Since 2019, the annual payment back then was HK$0.028, compared to the most recent full-year payment of HK$0.0536. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year 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.

We Could See Precious Dragon Technology Holdings' Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Precious Dragon Technology Holdings has grown earnings per share at 6.5% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Precious Dragon Technology Holdings' prospects of growing its dividend payments in the future.

Our Thoughts On Precious Dragon Technology Holdings' Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Precious Dragon Technology Holdings you should be aware of, and 1 of them is a bit concerning. 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.