Chow Tai Fook Jewellery Group's (HKG:1929) Upcoming Dividend Will Be Larger Than Last Year's

Chow Tai Fook Jewellery Group Limited's (HKG:1929) dividend will be increasing from last year's payment of the same period to HK$0.28 on 19th of August. Based on this payment, the dividend yield for the company will be 3.1%, which is fairly typical for the industry.

View our latest analysis for Chow Tai Fook Jewellery Group

Chow Tai Fook Jewellery Group's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. The last payment made up 74% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

The next year is set to see EPS grow by 52.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 57% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of HK$0.10 in 2012 to the most recent total annual payment of HK$0.50. This means that it has been growing its distributions at 17% 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

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. Chow Tai Fook Jewellery Group has impressed us by growing EPS at 17% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

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. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Chow Tai Fook Jewellery Group that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.