PAX Global Technology Limited (HKG:327) has announced that it will increase its dividend to HK$0.23 from the payment on June 27 last year. This results in a dividend yield of 7.2%, which should please shareholders.
Check out our latest analysis for PAX Global Technology.
PAX Global Technology’s dividend is well covered by profit.
It’s great to have a high dividend yield, but you also need to consider whether the payments are sustainable. Based on the last payment, PAX Global Technology very comfortably earned enough income to cover its dividend. This suggests that much of the profits are being reinvested into the business to drive growth.
Next year, EPS is expected to increase by 43.3%. Assuming the dividend continues in line with recent trends, the payout ratio could be 36% by next year, which would be well within a sustainable range.
PAX Global Technology does not have a long payment history
This dividend track record is very strong, but since it’s only been around for 9 years, we’d like to see a few more years of history before drawing any firm conclusions. The total annual dividend paid was HK$0.46, up from a total of HK$0.04 in 2015. This means it has grown its distribution at a rate of 31% per year over that time. PAX Global Technology is growing its dividend very quickly, which is very interesting. However, given the short payment history, it is questionable whether this performance will persist across market cycles.
Dividends are likely to increase
Investors may be attracted to a stock based on the quality of its payment history. It’s encouraging to see that PAX Global Technology has grown its earnings per share at 18% per year over the last five years. The company pays out a large amount of cash as dividends, but the payout ratio looks okay.
PAX Global Technology looks like a high dividend stock
Overall, we think this has the potential to be an attractive income stock, and this year’s dividend increase will only make the stock even better. The company easily earns enough to cover its dividend payments, and it’s great to see these earnings converting into cash flow. Overall, this ticks a lot of boxes that we look for when choosing income stocks.
Market movements prove how highly valued a consistent dividend policy is compared to a more unpredictable dividend policy. Still, investors need to consider more factors than dividends when analyzing a company. For example, we chose 1 warning sign for PAX Global Technology Here’s what investors should know before putting money into this stock.Looking for more high-yield dividend ideas? Try ours A group of people with strong dividends.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
