Lee & Man Chemical Company Limited (HKG: 746) the dividend will increase on September 3 to HK $ 0.26, with investors receiving 247% more than last year. This brings the dividend yield from 4.0% to 7.1%, which shareholders will be delighted with.
While dividend yield is important for income investors, it is also important to take into account any significant change in the price of the shares, as this will generally outweigh any gains from distributions. Investors will be delighted to see that the Lee & Man Chemical share price has risen 42% in the past 3 months, which is good for shareholders and may also explain a drop in dividend yield.
See our latest review for Lee & Man Chemical
Lee & Man Chemical’s Profits Easily Cover Distributions
A high dividend yield for a few years doesn’t mean much if it can’t be sustained. Before making this announcement, Lee & Man Chemical was easily earning enough to cover the dividend. This means that most of what the business earns is used to help it grow.
If the trend of recent years continues, EPS will increase by 32.8% over the next 12 months. Assuming the dividend continues according to recent trends, we think the payout ratio could be 33% by next year, which is within a fairly sustainable range.
While the company has been paying a dividend for a long time, it has reduced the dividend at least once in the past 10 years. The dividend went from HK $ 0.18 in 2011 to the last annual payment of HK $ 0.24. This implies that the company has increased its distributions at an annual rate of approximately 2.9% over this period. We are happy to see that the dividend has increased, but with a limited growth rate and fluctuations in payments, the total shareholder return may be limited.
The dividend seems likely to increase
Growth in earnings per share could be a mitigating factor considering past dividend fluctuations. We are encouraged to see that Lee & Man Chemical has increased its earnings per share by 33% per year over the past five years. Profits grew rapidly and, with a low payout ratio, we think the company could turn out to be a great dividend stock.
We really like the Lee & Man Chemical dividend
In summary, it is always positive to see the dividend increase and we are particularly satisfied with its overall sustainability. Distributions are quite easily covered by profits, which are also converted into cash flow. Considering all of this, this looks like a good dividend opportunity.
Companies with a stable dividend policy are likely to benefit from greater investor interest than those with a more inconsistent approach. At the same time, there are other factors that our readers should be aware of before investing any capital in a stock. For example, we have selected 2 warning signs for Lee & Man Chemical that investors should consider. Looking for more high yield dividend ideas? Try our organized list of big dividend payers.
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