Luk Fook Holdings (International)'s (HKG:590) Dividend Will Be Increased To HK$0.64

The board of Luk Fook Holdings (International) Limited (HKG:590) has announced that it will be paying its dividend of HK$0.64 on the 4th of September, an increased payment from last year's comparable dividend. This will take the annual payment to 8.7% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Luk Fook Holdings (International)

Luk Fook Holdings (International)'s Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Luk Fook Holdings (International) was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

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 40% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was HK$0.86 in 2014, and the most recent fiscal year payment was HK$1.44. This means that it has been growing its distributions at 5.3% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been crawling upwards at 3.4% per year. While growth may be thin on the ground, Luk Fook Holdings (International) could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Luk Fook Holdings (International)'s Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Luk Fook Holdings (International) that you should be aware of before investing. 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.

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