The board of Tai Ping Carpets International Limited (HKG:146) has announced that it will be paying its dividend of HK$0.12 on the 30th of December, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 9.3%, providing a nice boost to shareholder returns.

See our latest analysis for Tai Ping Carpets International

Tai Ping Carpets International's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Tai Ping Carpets International's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share could rise by 60.1% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. There hasn't been much of a change in the dividend over the last 10 years. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Tai Ping Carpets International has seen EPS rising for the last five years, at 60% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Tai Ping Carpets International could prove to be a strong dividend payer.

We Really Like Tai Ping Carpets International's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Tai Ping Carpets International that investors should know about before committing capital to this stock. Is Tai Ping Carpets International not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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