The board of Liaoning Port Co., Ltd. (HKG:2880) has announced that it will be increasing its dividend by 52% on the 30th of August to CN¥0.029, up from last year's comparable payment of CN¥0.0191. Even though the dividend went up, the yield is still quite low at only 3.4%.
See our latest analysis for Liaoning Port
Liaoning Port's Dividend Is Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Liaoning Port's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS could expand by 1.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 52% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was CN¥0.0261, compared to the most recent full-year payment of CN¥0.0191. Doing the maths, this is a decline of about 3.1% per year. A company that decreases its dividend over time generally isn't what we are looking for.
Liaoning Port May Find It Hard To Grow The 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. However, Liaoning Port's EPS was effectively flat over the past five years, which could stop the company from paying more every year. While growth may be thin on the ground, Liaoning Port could always pay out a higher proportion of earnings to increase shareholder returns.
In Summary
Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Liaoning Port that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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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