Kingboard Laminates Holdings (HKG:1888) Is Due To Pay A Dividend Of HK$0.10

The board of Kingboard Laminates Holdings Limited (HKG:1888) has announced that it will pay a dividend of HK$0.10 per share on the 4th of July. This means that the annual payment is 2.8% of the current stock price, which is lower than what the rest of the industry is paying.

See our latest analysis for Kingboard Laminates Holdings

Kingboard Laminates Holdings' Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Kingboard Laminates Holdings was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 19%, which makes us pretty 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 2014, the dividend has gone from HK$0.17 total annually to HK$0.16. The dividend has shrunk at a rate of less than 1% a year over this period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 23% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. 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. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 Kingboard Laminates Holdings that investors should know about before committing capital to this stock. Is Kingboard Laminates Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.