Emperor Watch & Jewellery's (HKG:887) Shareholders Will Receive A Bigger Dividend Than Last Year

Emperor Watch & Jewellery Limited (HKG:887) has announced that it will be increasing its dividend from last year's comparable payment on the 22nd of September to HK$0.0076. This takes the dividend yield to 8.0%, which shareholders will be pleased with.

Check out our latest analysis for Emperor Watch & Jewellery

Emperor Watch & Jewellery's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Emperor Watch & Jewellery's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 3.3% 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 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

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$0.0178, compared to the most recent full-year payment of HK$0.0152. This works out to be a decline of approximately 1.6% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Emperor Watch & Jewellery May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings have grown at around 3.3% a year for the past five years, which isn't massive but still better than seeing them shrink. While growth may be thin on the ground, Emperor Watch & Jewellery could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Emperor Watch & Jewellery that investors should know about before committing capital to this stock. 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.