Keck Seng Investments (Hong Kong) (HKG:184) Is Paying Out Less In Dividends Than Last Year

Keck Seng Investments (Hong Kong) Limited (HKG:184) is reducing its dividend to HK$0.03 on the 30th of Octoberwhich is 40% less than last year's comparable payment of HK$0.05. However, the dividend yield of 4.8% is still a decent boost to shareholder returns.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Keck Seng Investments (Hong Kong)'s Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Keck Seng Investments (Hong Kong)'s dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share could rise by 69.2% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 10% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Keck Seng Investments (Hong Kong)

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$0.15 total annually to HK$0.12. This works out to be a decline of approximately 2.2% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Keck Seng Investments (Hong Kong) has seen EPS rising for the last five years, at 69% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Keck Seng Investments (Hong Kong)'s Dividend

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Keck Seng Investments (Hong Kong) has the makings of a solid income stock moving forward. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Keck Seng Investments (Hong Kong) that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.