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

KangLi International Holdings Limited (HKG:6890) has announced that it will be increasing its dividend on the 12th of July to HK$0.05, which will be 32% higher than last year. This will take the annual payment from 8.2% to 8.6% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for KangLi International Holdings

KangLi International Holdings' Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, KangLi International Holdings was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

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

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2019, the dividend has gone from CN¥0.016 to CN¥0.04. This means that it has been growing its distributions at 37% per annum over that time. KangLi International Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends 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. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

KangLi International Holdings Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that KangLi International Holdings is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for KangLi International Holdings that you should be aware of before investing. Is KangLi International Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.