EEKA Fashion Holdings (HKG:3709) shareholders will receive a bigger dividend than last year
EEKA Fashion Holdings Limited (HKG: 3709) dividend will increase to HK$0.48 on June 30. This brings the dividend yield from 4.0% to 4.2%, which will delight shareholders.
Check out our latest analysis for EEKA Fashion Holdings
EEKA Fashion Holdings payment has strong revenue coverage
Impressive dividend yields are good, but that doesn’t matter much if payouts can’t be sustained. Based on the last payout, EEKA Fashion Holdings was earning comfortably enough to cover the dividend. This indicates that a fairly large proportion of profits are reinvested in the business.
Over the next year, EPS is expected to increase by 17.8%. If the dividend continues to follow recent trends, we estimate the payout ratio to be 57%, which is within the range that allows us to be comfortable with the sustainability of the dividend.
EEKA Fashion Holdings’ dividend lacks consistency
Even in its relatively short history, the company has cut the dividend at least once. For this reason, we are a little cautious about the consistency of dividends over a full economic cycle. Since 2015, the first annual installment was CN¥0.08, compared to CN¥0.39 for the last annual installment. This means that it increased its distributions by 25% per year during this period. It’s great to see strong growth in dividend payouts, but cuts are concerning as it may indicate that the payout policy is too ambitious.
The dividend should increase
With a relatively volatile dividend, it is even more important to assess whether earnings per share are increasing, which could indicate dividend growth in the future. We are encouraged to see that EEKA Fashion Holdings has increased its earnings per share by 12% per year over the past five years. Profits are on the rise and pay only a small portion of those profits to shareholders.
EEKA Fashion Holdings looks like a big dividend stock
Overall, we think it could be an attractive income stock, and it’s only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also converted into cash flow. Overall, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favor companies with a consistent and stable dividend policy as opposed to those with an irregular one. Yet investors must consider a host of other factors, aside from dividend payments, when analyzing a company. Pushing the debate a little further, we have identified 1 warning sign for EEKA Fashion Holdings that investors should be aware of going forward. EEKA Fashion Holdings not quite the opportunity you were looking for? Why not check out our selection of the best dividend stocks.
Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.
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.