The board of Kerry Logistics Network Limited (HKG:636) has announced that it will be increasing its dividend on the 11th of June to HK$0.24. This makes the dividend yield about the same as the industry average at 2.1%.
Kerry Logistics Network's Payment Has Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Kerry Logistics Network was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to fall by 25.4%. If the dividend continues along recent trends, we estimate the payout ratio could be 45%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Kerry Logistics Network Doesn't Have A Long Payment History
It is great to see that Kerry Logistics Network 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$0.11 in 2014, and the most recent fiscal year payment was HK$0.35. This implies that the company grew its distributions at a yearly rate of about 18% 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.
We Could See Kerry Logistics Network's Dividend Growing
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Kerry Logistics Network has been growing its earnings per share at 8.9% a year over the past five years. Kerry Logistics Network definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We Really Like Kerry Logistics Network's Dividend
Overall, a dividend increase is always good, and we think that Kerry Logistics Network is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.
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. Case in point: We've spotted 3 warning signs for Kerry Logistics Network (of which 1 can't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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