CK Asset Holdings (HKG:1113) Will Pay A Larger Dividend Than Last Year At HK$0.41

CK Asset Holdings Limited's (HKG:1113) dividend will be increasing on the 16th of September to HK$0.41, with investors receiving 21% more than last year. Even though the dividend went up, the yield is still quite low at only 3.6%.

See our latest analysis for CK Asset Holdings

CK Asset Holdings' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, CK Asset Holdings' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 25.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.

CK Asset Holdings' Dividend Has Lacked Consistency

CK Asset Holdings has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The dividend has gone from HK$0.70 in 2015 to the most recent annual payment of HK$1.80. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. CK Asset Holdings 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.

CK Asset Holdings May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, CK Asset Holdings' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. 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. 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 CK Asset Holdings that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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