Liu Chong Hing Investment (HKG:194) Is Increasing Its Dividend To HK$0.28

The board of Liu Chong Hing Investment Limited (HKG:194) has announced that it will be increasing its dividend on the 6th of June to HK$0.28. Based on the announced payment, the dividend yield for the company will be 6.3%, which is fairly typical for the industry.

Check out our latest analysis for Liu Chong Hing Investment

Liu Chong Hing Investment's Earnings Easily Cover the Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last dividend was quite easily covered by Liu Chong Hing Investment's earnings. This means that a large portion of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 1.4% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 42%, which is definitely feasible to continue.

Liu Chong Hing Investment's Dividend Has Lacked Consistency

Liu Chong Hing Investment has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from HK$0.30 in 2013 to the most recent annual payment of HK$0.46. This means that it has been growing its distributions at 4.9% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Liu Chong Hing Investment hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Liu Chong Hing Investment's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Liu Chong Hing Investment's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

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. Case in point: We've spotted 3 warning signs for Liu Chong Hing Investment (of which 1 shouldn't be ignored!) you should know about. Is Liu Chong Hing Investment not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.