Stock Analysis

Tan Chong International (HKG:693) Is Increasing Its Dividend To HK$0.05

SEHK:693
Source: Shutterstock

Tan Chong International Limited (HKG:693) will increase its dividend on the 24th of June to HK$0.05. The announced payment will take the dividend yield to 3.3%, which is in line with the average for the industry.

See our latest analysis for Tan Chong International

Tan Chong International's Earnings Easily Cover the Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Tan Chong 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.

Looking forward, earnings per share could rise by 14.6% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
SEHK:693 Historic Dividend April 27th 2022

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The most recent annual payment of HK$0.065 is about the same as the first annual payment 10 years ago. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

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. It's encouraging to see Tan Chong International has been growing its earnings per share at 15% a year over the past five years. Tan Chong International definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Tan Chong International's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Just as an example, we've come across 3 warning signs for Tan Chong International you should be aware of, and 1 of them is a bit concerning. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether Tan Chong International is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.