E-Star Commercial Management's (HKG:6668) Shareholders Will Receive A Bigger Dividend Than Last Year

E-Star Commercial Management Company Limited's (HKG:6668) dividend will be increasing to HK$0.10 on 8th of July. Despite this raise, the dividend yield of 3.7% is only a modest boost to shareholder returns.

See our latest analysis for E-Star Commercial Management

E-Star Commercial Management's Earnings Easily Cover the Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, E-Star Commercial Management's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 34.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 41%, which is in the range that makes us comfortable with the sustainability of the dividend.

E-Star Commercial Management Is Still Building Its Track Record

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that E-Star Commercial Management has grown earnings per share at 18% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

We Really Like E-Star Commercial Management's Dividend

Overall, a dividend increase is always good, and we think that E-Star Commercial Management is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. As an example, we've identified 2 warning signs for E-Star Commercial Management that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.