Smart-Core Holdings (HKG:2166) Will Pay A Larger Dividend Than Last Year At HK$0.10

Smart-Core Holdings Limited (HKG:2166) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of June to HK$0.10. This will take the annual payment to 7.1% of the stock price, which is above what most companies in the industry pay.

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Smart-Core Holdings' Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Smart-Core Holdings' dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS could expand by 14.5% if recent trends continue. If the dividend continues on this path, the payout ratio could be 55% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Smart-Core Holdings

Smart-Core Holdings' Dividend Has Lacked Consistency

It's comforting to see that Smart-Core Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. The annual payment during the last 8 years was HK$0.04 in 2017, and the most recent fiscal year payment was HK$0.12. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Smart-Core Holdings has grown earnings per share at 14% 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.

Smart-Core Holdings Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Smart-Core Holdings that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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