Dah Sing Banking Group's (HKG:2356) Dividend Will Be HK$0.39

The board of Dah Sing Banking Group Limited (HKG:2356) has announced that it will pay a dividend of HK$0.39 per share on the 18th of June. However, the dividend yield of 7.8% still remains in a typical range for the industry.

Dah Sing Banking Group's Dividend Forecasted To Be Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Having distributed dividends for at least 10 years, Dah Sing Banking Group has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 45%, which means that Dah Sing Banking Group would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 30.4%. Analysts forecast the future payout ratio could be 47% over the same time horizon, which is a number we think the company can maintain.

View our latest analysis for Dah Sing Banking Group

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from HK$0.34 total annually to HK$0.66. This means that it has been growing its distributions at 6.9% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Dah Sing Banking Group might have put its house in order since then, but we remain cautious.

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. Unfortunately, Dah Sing Banking Group's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Dah Sing Banking Group's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Dah Sing Banking Group has been making. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Dah Sing Banking Group that investors need to be conscious of moving forward. 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.