Chow Tai Fook Jewellery Group (HKG:1929) Is Paying Out A Larger Dividend Than Last Year

Chow Tai Fook Jewellery Group Limited's (HKG:1929) dividend will be increasing to HK$0.24 on 20th of August. This will take the dividend yield to an attractive 2.6%, providing a nice boost to shareholder returns.

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. Investors will be pleased to see that Chow Tai Fook Jewellery Group's stock price has increased by 42% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Chow Tai Fook Jewellery Group

Chow Tai Fook Jewellery Group's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Chow Tai Fook Jewellery Group's earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 13.0% over the next year. If the dividend continues on this path, the payout ratio could be 62% by next year, which we think can be pretty sustainable going forward.

Chow Tai Fook Jewellery Group's Dividend Has Lacked Consistency

Looking back, Chow Tai Fook Jewellery Group's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2012, the dividend has gone from HK$0.10 to HK$0.48. This means that it has been growing its distributions at 19% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Chow Tai Fook Jewellery Group has grown earnings per share at 15% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Chow Tai Fook Jewellery Group Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Chow Tai Fook Jewellery Group that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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