E-Star Commercial Management's (HKG:6668) Dividend Will Be Increased To CN¥0.13

E-Star Commercial Management Company Limited (HKG:6668) will increase its dividend from last year's comparable payment on the 10th of July to CN¥0.13. This will take the dividend yield to an attractive 9.8%, providing a nice boost to shareholder returns.

See our latest analysis for E-Star Commercial Management

E-Star Commercial Management's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment made up 70% 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 42.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 54%, which is in the range that makes us comfortable with the sustainability of the dividend.

E-Star Commercial Management's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The dividend has gone from an annual total of CN¥0.0363 in 2021 to the most recent total annual payment of CN¥0.12. This works out to be a compound annual growth rate (CAGR) of approximately 49% a year over that time. 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.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, E-Star Commercial Management has only grown its earnings per share at 4.8% per annum over the past five years. E-Star Commercial Management's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. For instance, we've picked out 1 warning sign for E-Star Commercial Management that investors should take into consideration. Is E-Star Commercial Management not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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