Ho Tung Chemical's (TWSE:1714) Upcoming Dividend Will Be Larger Than Last Year's

Ho Tung Chemical Corp.'s (TWSE:1714) dividend will be increasing from last year's payment of the same period to NT$0.30 on 13th of September. Even though the dividend went up, the yield is still quite low at only 3.0%.

See our latest analysis for Ho Tung Chemical

Ho Tung Chemical'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. The last dividend was quite easily covered by Ho Tung Chemical's earnings. This means that a large portion of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 21.3% over the next 12 months. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

Ho Tung Chemical's Dividend Has Lacked Consistency

It's comforting to see that Ho Tung Chemical has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. There hasn't been much of a change in the dividend over the last 6 years. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Ho Tung Chemical has grown earnings per share at 21% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Ho Tung Chemical 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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 2 warning signs for Ho Tung Chemical (of which 1 is potentially serious!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.

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