Luk Fook Holdings (International)'s (HKG:590) Shareholders Will Receive A Bigger Dividend Than Last Year

Luk Fook Holdings (International) Limited (HKG:590) will increase its dividend from last year's comparable payment on the 4th of September to HK$0.64. This will take the dividend yield to an attractive 8.9%, providing a nice boost to shareholder returns.

See our latest analysis for Luk Fook Holdings (International)

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

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Luk Fook Holdings (International)'s earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 2.4%. If the dividend continues on this path, the payout ratio could be 46% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was HK$0.86, compared to the most recent full-year payment of HK$1.36. This implies that the company grew its distributions at a yearly rate of about 4.7% 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.

Luk Fook Holdings (International) May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings has been rising at 3.4% per annum over the last five years, which admittedly is a bit slow. The company has been growing at a pretty soft 3.4% per annum, and is paying out quite a lot of its earnings to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

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

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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. 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.

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