KangLi International Holdings (HKG:6890) Is Paying Out A Larger Dividend Than Last Year

The board of KangLi International Holdings Limited (HKG:6890) has announced that the dividend on 12th of July will be increased to HK$0.05, which will be 32% higher than last year. This will take the annual payment from 8.5% to 8.5% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for KangLi International Holdings

KangLi International Holdings' Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. KangLi International Holdings is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS could expand by 14.1% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

KangLi International Holdings' Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2019, the dividend has gone from CN¥0.016 to CN¥0.041. This works out to be a compound annual growth rate (CAGR) of approximately 37% 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.

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. We are encouraged to see that KangLi International Holdings has grown earnings per share at 14% per year over the past three years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think KangLi International Holdings' payments are rock solid. While KangLi International Holdings is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for KangLi International Holdings that investors should know about before committing capital to this stock. 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.