Powerlong Commercial Management Holdings Limited (HKG:9909) will increase its dividend on October 13 to HK$0.30. This brings the dividend yield to 7.4%, which is above the industry average.
See our latest analysis for Powerlong Commercial Management Holdings
Powerlong Commercial Management Holdings payout provides strong earnings coverage
A big dividend yield for a few years doesn’t mean much if it can’t be sustained. Prior to this announcement, Powerlong Commercial Management Holdings’ dividend was comfortably covered by both cash flow and earnings. This indicates that a large portion of the profits are reinvested in the business, with the aim of fueling growth.
Over the next year, EPS is expected to increase by 29.2%. If the dividend continues to follow recent trends, we estimate the payout ratio to be 51%, which is within the range that allows us to be comfortable with the sustainability of the dividend.
Powerlong Commercial Management Holdings’ dividend lacks consistency
In retrospect, the dividend has been volatile, but with a relatively short history, we believe it may be a bit early to draw conclusions about the long-term sustainability of the dividend. The first annual payment in the past 2 years was CN¥0.18 in 2020, and the most recent year’s payment was CN¥0.38. This implies that the company has increased its distributions at an annual rate of approximately 45% over this period. Powerlong Commercial Management Holdings has increased its distributions at a rapid pace despite cutting the dividend at least once in the past. Companies that have cut once often cut again, so we would be cautious about buying these stocks just for the dividend income.
The dividend should increase
Earnings per share growth could be a mitigating factor given past dividend fluctuations. We are encouraged to see that Powerlong Commercial Management Holdings has increased its earnings per share by 27% annually over the past three years. The company’s earnings per share have grown rapidly in recent years, and it has a good balance between reinvestment and paying dividends to shareholders, so we believe Powerlong Commercial Management Holdings could prove to be a strong dividend payer.
We really like the Powerlong Commercial Management Holdings dividend
Overall, we think it could be an attractive income stock, and it’s only getting better by paying a higher dividend this year. Profits easily cover distributions and the company generates plenty of cash. Overall, this checks a lot of the boxes we look for when choosing an income stock.
Companies with a stable dividend policy are likely to enjoy greater investor interest than those that suffer from a more inconsistent approach. However, there are other things for investors to consider when analyzing stock performance. For example, we identified 2 warning signs for Powerlong Commercial Management Holdings which you should be aware of before investing. If you are a dividend investor, you can also consult our curated list of high yielding dividend stocks.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.