Towngas Smart Energy's (HKG:1083) Dividend Will Be HK$0.15

Towngas Smart Energy Company Limited (HKG:1083) has announced that it will pay a dividend of HK$0.15 per share on the 12th of July. This means that the annual payment will be 3.6% of the current stock price, which is in line with the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Towngas Smart Energy's stock price has reduced by 32% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

See our latest analysis for Towngas Smart Energy

Towngas Smart Energy's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Towngas Smart Energy was easily earning enough to 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 27.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 32% by next year, which is in a pretty sustainable range.

Towngas Smart Energy Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was HK$0.05 in 2012, and the most recent fiscal year payment was HK$0.15. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Towngas Smart Energy May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Towngas Smart Energy hasn't seen much change in its earnings per share over the last five years. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Towngas Smart Energy Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Towngas Smart Energy might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Towngas Smart Energy has 4 warning signs (and 1 which is concerning) we think you should know about. Is Towngas Smart Energy not quite the opportunity you were looking for? Why not check out our selection of top 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.