China Galaxy Securities Co., Ltd. (HKG:6881) has announced that on 20th of August, it will be paying a dividend ofCN¥0.2411, which a reduction from last year's comparable dividend. However, the dividend yield of 5.8% is still a decent boost to shareholder returns.
Check out our latest analysis for China Galaxy Securities
China Galaxy Securities' Earnings Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. However, China Galaxy Securities' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
The next year is set to see EPS grow by 26.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 35% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of CN¥0.062 in 2014 to the most recent total annual payment of CN¥0.22. This means that it has been growing its distributions at 14% per annum 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.
China Galaxy Securities Could Grow Its Dividend
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. China Galaxy Securities has impressed us by growing EPS at 9.4% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
We Really Like China Galaxy Securities' Dividend
It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that China Galaxy Securities has the makings of a solid income stock moving forward. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All of these factors considered, we think this has solid potential as a dividend 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 2 warning signs for China Galaxy Securities that investors should take into consideration. Is China Galaxy Securities 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.
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