Kaisa Group Holdings (HKG:1638) Has Announced That It Will Be Increasing Its Dividend To HK$0.04

Kaisa Group Holdings Ltd. (HKG:1638) has announced that it will be increasing its dividend on the 17th of December to HK$0.04. This will take the dividend yield from 6.2% to 6.7%, providing a nice boost to shareholder returns.

See our latest analysis for Kaisa Group Holdings

Kaisa Group Holdings' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Kaisa Group Holdings was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 7.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 17% by next year, which is in a pretty sustainable range.

Kaisa Group Holdings' Dividend Has Lacked Consistency

It's comforting to see that Kaisa Group Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. The first annual payment during the last 8 years was CN¥0.12 in 2013, and the most recent fiscal year payment was CN¥0.12. Dividend payments have been growing, but very slowly over the period. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Kaisa Group Holdings has seen EPS rising for the last five years, at 24% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We'd also point out that Kaisa Group Holdings has issued stock equal to 15% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

We Really Like Kaisa Group Holdings' 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Kaisa Group Holdings has 4 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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