Essex Bio-Technology (HKG:1061) Has Announced That It Will Be Increasing Its Dividend To HK$0.055

Essex Bio-Technology Limited's (HKG:1061) dividend will be increasing to HK$0.055 on 20th of May. This makes the dividend yield about the same as the industry average at 2.4%.

View our latest analysis for Essex Bio-Technology

Essex Bio-Technology's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, Essex Bio-Technology'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.

The next year is set to see EPS grow by 25.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 15% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was HK$0.012 in 2012, and the most recent fiscal year payment was HK$0.11. This implies that the company grew its distributions at a yearly rate of about 25% 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Essex Bio-Technology has seen EPS rising for the last five years, at 20% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Essex Bio-Technology's prospects of growing its dividend payments in the future.

Essex Bio-Technology Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Essex Bio-Technology is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Essex Bio-Technology that you should be aware of before investing. 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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