Nanyang Holdings (HKG:212) Will Pay A Dividend Of HK$1.40

The board of Nanyang Holdings Limited (HKG:212) has announced that it will pay a dividend on the 13th of June, with investors receiving HK$1.40 per share. Including this payment, the dividend yield on the stock will be 3.6%, which is a modest boost for shareholders' returns.

See our latest analysis for Nanyang Holdings

Nanyang Holdings' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Nanyang Holdings' dividend was only 13% of earnings, however it was paying out 447% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

If the trend of the last few years continues, EPS will grow by 9.5% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 23% by next year, which is in a pretty sustainable range.

Nanyang Holdings Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was HK$0.50 in 2012, and the most recent fiscal year payment was HK$1.40. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Has 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. It's encouraging to see Nanyang Holdings has been growing its earnings per share at 9.5% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Nanyang Holdings' prospects of growing its dividend payments in the future.

Our Thoughts On Nanyang 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. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Nanyang Holdings (of which 1 doesn't sit too well with us!) you should know about. Is Nanyang Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.