Kingboard Laminates Holdings (HKG:1888) Will Pay A Dividend Of HK$0.10

Kingboard Laminates Holdings Limited (HKG:1888) will pay a dividend of HK$0.10 on the 4th of July. This means that the dividend yield is 2.5%, which is a bit low when comparing to other companies in the industry.

View our latest analysis for Kingboard Laminates Holdings

Kingboard Laminates Holdings' Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Kingboard Laminates Holdings' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 18%, which makes us pretty comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was HK$0.17, compared to the most recent full-year payment of HK$0.16. Payments have been decreasing at a very slow pace in this time period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

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. 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.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. 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. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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