Hsin Kao GasLtd (TWSE:9931) Has Announced That It Will Be Increasing Its Dividend To NT$1.00

The board of Hsin Kao Gas Co.,Ltd. (TWSE:9931) has announced that it will be paying its dividend of NT$1.00 on the 24th of July, an increased payment from last year's comparable dividend. This takes the annual payment to 2.7% of the current stock price, which is about average for the industry.

View our latest analysis for Hsin Kao GasLtd

Hsin Kao GasLtd's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last dividend was quite easily covered by Hsin Kao GasLtd's 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 0.4% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 61%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from NT$0.629 total annually to NT$1.00. This means that it has been growing its distributions at 4.7% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Hsin Kao GasLtd's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Hsin Kao GasLtd is a great stock to add to your portfolio if income is your focus.

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. Case in point: We've spotted 2 warning signs for Hsin Kao GasLtd (of which 1 is concerning!) you should know about. Is Hsin Kao GasLtd 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.

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