KangLi International Holdings' (HKG:6890) Upcoming Dividend Will Be Larger Than Last Year's

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 8.4% to 8.6% 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

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, KangLi International Holdings was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 14.1% over the next 12 months. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.

KangLi International Holdings' Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The dividend has gone from CN¥0.016 in 2019 to the most recent annual payment of CN¥0.04. This implies that the company grew its distributions at a yearly rate of about 37% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

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. It's encouraging to see KangLi International Holdings has been growing its earnings per share at 14% a 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.

We Really Like KangLi International Holdings' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for KangLi International Holdings that investors should take into consideration. 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.