Kingboard Laminates Holdings (HKG:1888) Has Announced That It Will Be Increasing Its Dividend To HK$0.50

Kingboard Laminates Holdings Limited (HKG:1888) will increase its dividend from last year's comparable payment on the 3rd of July to HK$0.50. This takes the annual payment to 4.5% of the current stock price, which is about average for the industry.

Our free stock report includes 1 warning sign investors should be aware of before investing in Kingboard Laminates Holdings. Read for free now.

Kingboard Laminates Holdings' Projected Earnings Seem Likely To Cover Future Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before this announcement, Kingboard Laminates Holdings was paying out 75% of earnings, but a comparatively small 65% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

The next year is set to see EPS grow by 127.4%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 68% which would be quite comfortable going to take the dividend forward.

See our latest analysis for Kingboard Laminates Holdings

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from HK$0.16 total annually to HK$0.40. This means that it has been growing its distributions at 9.6% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth Potential Is Shaky

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. Kingboard Laminates Holdings' EPS has fallen by approximately 11% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Kingboard Laminates Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Kingboard Laminates Holdings' payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

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. Taking the debate a bit further, we've identified 1 warning sign for Kingboard Laminates Holdings that investors need to be conscious of moving forward. 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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