Yue Yuen Industrial (Holdings) Limited (HKG:551) will increase its dividend from last year's comparable payment on the 24th of June to $0.90. This will take the dividend yield to an attractive 9.8%, providing a nice boost to shareholder returns.

Check out our latest analysis for Yue Yuen Industrial (Holdings)

Yue Yuen Industrial (Holdings)'s Future Dividends May Potentially Be At Risk

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Yue Yuen Industrial (Holdings) was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Earnings per share is forecast to rise by 17.8% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.

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 annual payment back then was $0.142, compared to the most recent full-year payment of $0.167. This means that it has been growing its distributions at 1.7% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

We Could See Yue Yuen Industrial (Holdings)'s Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Yue Yuen Industrial (Holdings) has grown earnings per share at 5.6% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. Taking the debate a bit further, we've identified 1 warning sign for Yue Yuen Industrial (Holdings) that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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