Far East Consortium International (HKG:35) Has Announced That It Will Be Increasing Its Dividend To HK$0.16

Far East Consortium International Limited (HKG:35) will increase its dividend from last year's comparable payment on the 21st of September to HK$0.16. This will take the annual payment to 7.8% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Far East Consortium International

Far East Consortium International's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Far East Consortium International was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 59.1% over the next 12 months. If recent patterns in the dividend continue, we could see the payout ratio reaching 80% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was HK$0.06 in 2012, and the most recent fiscal year payment was HK$0.20. This means that it has been growing its distributions at 13% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings has been rising at 3.9% per annum over the last five years, which admittedly is a bit slow. While EPS growth is quite low, Far East Consortium International has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Far East Consortium International's Dividend

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. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 4 warning signs for Far East Consortium International (2 don't sit too well with us!) that you should be aware of before investing. Is Far East Consortium International 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.