K. Wah International Holdings (HKG:173) Is Due To Pay A Dividend Of HK$0.07

K. Wah International Holdings Limited (HKG:173) will pay a dividend of HK$0.07 on the 26th of October. Based on this payment, the dividend yield on the company's stock will be 9.0%, which is an attractive boost to shareholder returns.

Check out our latest analysis for K. Wah International Holdings

K. Wah International Holdings' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment made up 85% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, earnings per share is forecast to rise by 49.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 59%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

K. Wah International Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was HK$0.13, compared to the most recent full-year payment of HK$0.21. This implies that the company grew its distributions at a yearly rate of about 4.9% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Earnings per share has been sinking by 20% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Our Thoughts On K. Wah International Holdings' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for K. Wah International Holdings that investors should know about before committing capital to this stock. 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.