Chow Tai Fook Jewellery Group's (HKG:1929) Dividend Will Be Increased To HK$0.28

Chow Tai Fook Jewellery Group Limited's (HKG:1929) dividend will be increasing to HK$0.28 on 19th of August. The announced payment will take the dividend yield to 3.7%, which is in line with the average for the industry.

Check out our latest analysis for Chow Tai Fook Jewellery Group

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

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Chow Tai Fook Jewellery Group's dividend made up quite a large proportion of earnings but only 40% of free cash flows. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 15.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 74% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the dividend has gone from HK$0.10 to HK$0.50. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see Chow Tai Fook Jewellery Group has been growing its earnings per share at 17% a year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Chow Tai Fook Jewellery Group Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Chow Tai Fook Jewellery Group is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Chow Tai Fook Jewellery Group that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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