PAX Global Technology (HKG:327) Is Increasing Its Dividend To HK$0.15

PAX Global Technology Limited's (HKG:327) dividend will be increasing to HK$0.15 on 21st of June. This takes the annual payment to 3.9% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for PAX Global Technology

PAX Global Technology's Earnings Easily Cover the Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, PAX Global Technology's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 18.8%. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

PAX Global Technology Is Still Building Its Track Record

It is great to see that PAX Global Technology has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The first annual payment during the last 7 years was HK$0.04 in 2015, and the most recent fiscal year payment was HK$0.30. This implies that the company grew its distributions at a yearly rate of about 33% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. PAX Global Technology has impressed us by growing EPS at 13% per year over the past five years. PAX Global Technology definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like PAX Global Technology's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for PAX Global Technology that you should be aware of before investing. 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.