Hsin Kao GasLtd (TWSE:9931) Is Paying Out A Larger Dividend Than Last Year

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.

Check out our latest analysis for Hsin Kao GasLtd

Hsin Kao GasLtd's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, Hsin Kao GasLtd was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Unless the company can turn things around, EPS could fall by 0.4% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 61%, which is definitely feasible to continue.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was NT$0.629 in 2014, and the most recent fiscal year payment was NT$1.00. This works out to be a compound annual growth rate (CAGR) of approximately 4.7% a year 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Hsin Kao GasLtd's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Hsin Kao GasLtd's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 example, we've identified 2 warning signs for Hsin Kao GasLtd (1 can't be ignored!) that you should be aware of before investing. 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.