Luk Fook Holdings (International) (HKG:590) Is Paying Out A Dividend Of HK$0.55

Luk Fook Holdings (International) Limited's (HKG:590) investors are due to receive a payment of HK$0.55 per share on 6th of September. Based on this payment, the dividend yield on the company's stock will be 5.4%, which is an attractive boost to shareholder returns.

See our latest analysis for Luk Fook Holdings (International)

Luk Fook Holdings (International)'s Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Luk Fook Holdings (International) was quite comfortably earning enough to cover the dividend. 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 66.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% 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. Since 2013, the annual payment back then was HK$0.86, compared to the most recent full-year payment of HK$1.10. This implies that the company grew its distributions at a yearly rate of about 2.5% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, Luk Fook Holdings (International)'s earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Luk Fook Holdings (International)'s payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Luk Fook Holdings (International) 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.