The board of China CITIC Bank Corporation Limited (HKG:998) has announced that it will be increasing its dividend by 8.5% on the 31st of July to CN¥0.3907, up from last year's comparable payment of CN¥0.36. This takes the annual payment to 7.6% of the current stock price, which is about average for the industry.
Check out our latest analysis for China CITIC Bank
China CITIC Bank's Payment Expected To Have Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.
China CITIC Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 28%, which means that China CITIC Bank would be able to pay its last dividend without pressure on the balance sheet.
Over the next 3 years, EPS is forecast to expand by 23.7%. Analysts estimate the future payout ratio will be 28% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from CN¥0.252 total annually to CN¥0.356. This implies that the company grew its distributions at a yearly rate of about 3.5% over that duration. 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.
China CITIC Bank Could Grow Its Dividend
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that China CITIC Bank has been growing its earnings per share at 5.2% a year over the past five years. China CITIC Bank definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Our Thoughts On China CITIC Bank's Dividend
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for China CITIC Bank that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
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