Changan Minsheng APLL Logistics Co., Ltd. (HKG:1292) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of September to CN¥0.2192. The payment will take the dividend yield to 9.6%, which is in line with the average for the industry.
See our latest analysis for Changan Minsheng APLL Logistics
Changan Minsheng APLL Logistics' Payment Has Solid Earnings Coverage
Solid dividend yields are great, but they only really help us if the payment is sustainable. The last payment was quite easily covered by earnings, but it made up 125% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
If the trend of the last few years continues, EPS will grow by 4.1% over the next 12 months. If the dividend continues on this path, the payout ratio could be 54% 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¥0.25, compared to the most recent full-year payment of CN¥0.20. The dividend has shrunk at around 2.2% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend's Growth Prospects Are Limited
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. Earnings have grown at around 4.1% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 4.1% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
Our Thoughts On Changan Minsheng APLL Logistics' Dividend
Overall, we always like to see the dividend being raised, but we don't think Changan Minsheng APLL Logistics will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Changan Minsheng APLL Logistics that investors need to be conscious of moving forward. Is Changan Minsheng APLL Logistics not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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