Pico Far East Holdings (HKG:752) Will Pay A Larger Dividend Than Last Year At HK$0.05

Pico Far East Holdings Limited's (HKG:752) dividend will be increasing to HK$0.05 on 14th of April. Although the dividend is now higher, the yield is only 3.8%, which is below the industry average.

View our latest analysis for Pico Far East Holdings

Pico Far East Holdings' Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Pico Far East Holdings was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 14.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 48%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the first annual payment was HK$0.08, compared to the most recent full-year payment of HK$0.05. Doing the maths, this is a decline of about 4.6% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Pico Far East Holdings' EPS has fallen by approximately 15% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Pico Far East Holdings will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Pico Far East Holdings (of which 1 makes us a bit uncomfortable!) you should know about. 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.