ASM Pacific Technology (HKG:522) Will Pay A Larger Dividend Than Last Year At HK$2.60

ASM Pacific Technology Limited (HKG:522) will increase its dividend on the 31st of May to HK$2.60. This will take the dividend yield from 5.0% to 5.0%, providing a nice boost to shareholder returns.

Check out our latest analysis for ASM Pacific Technology

ASM Pacific Technology's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite easily covered by ASM Pacific Technology's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to fall by 8.7% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 60%, which is comfortable for the company to continue in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was HK$4.80 in 2012, and the most recent fiscal year payment was HK$3.90. This works out to be a decline of approximately 2.1% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

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. We are encouraged to see that ASM Pacific Technology has grown earnings per share at 16% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

ASM Pacific Technology Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that ASM Pacific Technology is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for ASM Pacific Technology you should be aware of, and 1 of them is a bit unpleasant. If you are a dividend investor, you might also want to look at our curated list of high yield 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.