Hock Lian Seng Holdings (SGX:J2T) Is Paying Out A Larger Dividend Than Last Year

The board of Hock Lian Seng Holdings Limited (SGX:J2T) has announced that the dividend on 16th of May will be increased to SGD0.018, which will be 20% higher than last year's payment of SGD0.015 which covered the same period. Based on this payment, the dividend yield for the company will be 4.7%, which is fairly typical for the industry.

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Hock Lian Seng Holdings' Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Hock Lian Seng Holdings was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share could rise by 20.6% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

View our latest analysis for Hock Lian Seng Holdings

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of SGD0.04 in 2015 to the most recent total annual payment of SGD0.018. The dividend has shrunk at around 7.7% a year during that period. 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

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Hock Lian Seng Holdings has impressed us by growing EPS at 21% per year over the past five years. 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.

Hock Lian Seng Holdings Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Hock Lian Seng Holdings 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.