COSCO SHIPPING International (Hong Kong) Co., Ltd.'s (HKG:517) investors are due to receive a payment of HK$0.175 per share on 28th of June. This takes the dividend yield to 9.7%, which shareholders will be pleased with.
See our latest analysis for COSCO SHIPPING International (Hong Kong)
COSCO SHIPPING International (Hong Kong)'s Dividend Is Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.
EPS is set to grow by 16.8% over the next year if recent trends continue. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 95%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.
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 HK$0.055 in 2014 to the most recent total annual payment of HK$0.40. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
Dividend Growth Could Be Constrained
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. We are encouraged to see that COSCO SHIPPING International (Hong Kong) has grown earnings per share at 17% per year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.
The Dividend Could Prove To Be Unreliable
Overall, we always like to see the dividend being raised, but we don't think COSCO SHIPPING International (Hong Kong) will make a great income stock. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for COSCO SHIPPING International (Hong Kong) that investors should take into consideration. Is COSCO SHIPPING International (Hong Kong) not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.