Luk Fook Holdings (International)'s (HKG:590) Dividend Will Be HK$0.55

The board of Luk Fook Holdings (International) Limited (HKG:590) has announced that it will pay a dividend on the 24th of December, with investors receiving HK$0.55 per share. Based on this payment, the dividend yield will be 4.5%, which is fairly typical for the industry.

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Luk Fook Holdings (International)'s Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Luk Fook Holdings (International) was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The business is earning enough to make the dividend feasible, but the cash payout ratio of 83% indicates it is more focused on returning cash to shareholders than growing the business.

The next year is set to see EPS grow by 53.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 34%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Luk Fook Holdings (International)

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The last annual payment of HK$1.10 was flat on the annual payment from10 years ago. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

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. Luk Fook Holdings (International) has seen EPS rising for the last five years, at 14% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

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. While Luk Fook Holdings (International) is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

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. For instance, we've picked out 1 warning sign for Luk Fook Holdings (International) that investors should take into consideration. Is Luk Fook Holdings (International) 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.