Zengame Technology Holding (HKG:2660) Is Increasing Its Dividend To HK$0.15

The board of Zengame Technology Holding Limited (HKG:2660) has announced that it will be increasing its dividend on the 30th of June to HK$0.15. This makes the dividend yield 9.7%, which is above the industry average.

View our latest analysis for Zengame Technology Holding

Zengame Technology Holding's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Zengame Technology Holding's dividend was comfortably covered by both cash flow and earnings. 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 54.8% over the next 12 months. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.

Zengame Technology Holding's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2019, the dividend has gone from CN¥0.09 to CN¥0.12. This means that it has been growing its distributions at 11% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

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. Zengame Technology Holding has impressed us by growing EPS at 55% per year over the past three years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Zengame Technology Holding Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Taking the debate a bit further, we've identified 2 warning signs for Zengame Technology Holding that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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