Powerlong Commercial Management Holdings' (HKG:9909) Shareholders Will Receive A Bigger Dividend Than Last Year

Powerlong Commercial Management Holdings Limited (HKG:9909) has announced that it will be increasing its dividend on the 13th of October to HK$0.30. This makes the dividend yield 7.5%, which is above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Powerlong Commercial Management Holdings' stock price has reduced by 66% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

Check out our latest analysis for Powerlong Commercial Management Holdings

Powerlong Commercial Management Holdings' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Powerlong Commercial Management Holdings was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 29.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 51% by next year, which is in a pretty sustainable range.

Powerlong Commercial Management Holdings' Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2020, the first annual payment was CN¥0.18, compared to the most recent full-year payment of CN¥0.38. This implies that the company grew its distributions at a yearly rate of about 45% over that duration. Powerlong Commercial Management Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

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. Powerlong Commercial Management Holdings has impressed us by growing EPS at 27% per year over the past three years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Powerlong Commercial Management Holdings Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

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. As an example, we've identified 2 warning signs for Powerlong Commercial Management Holdings that you should be aware of before investing. Is Powerlong Commercial Management 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.