S.A.S. Dragon Holdings (HKG:1184) Is Increasing Its Dividend To HK$0.30

S.A.S. Dragon Holdings Limited (HKG:1184) will increase its dividend on the 7th of June to HK$0.30. This will take the dividend yield from 9.9% to 9.9%, providing a nice boost to shareholder returns.

See our latest analysis for S.A.S. Dragon Holdings

S.A.S. Dragon Holdings' Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, based ont he last payment, S.A.S. Dragon Holdings was earning enough to cover the dividend pretty comfortably. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

If the trend of the last few years continues, EPS will grow by 28.7% over the next 12 months. If the dividend continues on this path, the payout ratio could be 37% 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 2012, the dividend has gone from HK$0.065 to HK$0.45. This means that it has been growing its distributions at 21% per annum over that time. S.A.S. Dragon Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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. S.A.S. Dragon Holdings has seen EPS rising for the last five years, at 29% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On S.A.S. Dragon Holdings' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While S.A.S. Dragon Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for S.A.S. Dragon Holdings that investors should know about before committing capital to this stock. 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.