Essex Bio-Technology (HKG:1061) Will Pay A Larger Dividend Than Last Year At HK$0.055

Essex Bio-Technology Limited (HKG:1061) has announced that it will be increasing its dividend on the 20th of May to HK$0.055. This makes the dividend yield about the same as the industry average at 2.2%.

View our latest analysis for Essex Bio-Technology

Essex Bio-Technology's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. 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.

If the trend of the last few years continues, EPS will grow by 19.9% over the next 12 months. If the dividend continues on this path, the payout ratio could be 16% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The dividend has gone from HK$0.012 in 2012 to the most recent annual payment of HK$0.11. This means that it has been growing its distributions at 25% per annum over that time. Essex Bio-Technology 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Essex Bio-Technology has impressed us by growing EPS at 20% per year over the past five years. Essex Bio-Technology definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Essex Bio-Technology's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Essex Bio-Technology stock. Is Essex Bio-Technology 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.