Chu Kong Shipping Enterprises (Group) (HKG:560) Has Re-Affirmed Its Dividend Of HK$0.02

The board of Chu Kong Shipping Enterprises (Group) Company Limited (HKG:560) has announced that it will pay a dividend on the 30th of June, with investors receiving HK$0.02 per share. The dividend yield is 2.1% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Chu Kong Shipping Enterprises (Group)

Chu Kong Shipping Enterprises (Group)'s Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Chu Kong Shipping Enterprises (Group)'s 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.

EPS is set to fall by 33.3% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 62%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The dividend has gone from HK$0.05 in 2012 to the most recent annual payment of HK$0.02. This works out to be a decline of approximately 8.8% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Chu Kong Shipping Enterprises (Group)'s EPS has fallen by approximately 33% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 1 warning sign for Chu Kong Shipping Enterprises (Group) that investors should take into consideration. 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.