China Beststudy Education Group (HKG:3978) has announced that it will be increasing its dividend from last year's comparable payment on the 16th of June to CN¥0.123. Despite this raise, the dividend yield of 2.3% is only a modest boost to shareholder returns.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that China Beststudy Education Group's stock price has increased by 32% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
China Beststudy Education Group's Projected Earnings Seem Likely To Cover Future Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, China Beststudy Education Group's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, earnings per share is forecast to rise by 25.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 40% by next year, which is in a pretty sustainable range.
See our latest analysis for China Beststudy Education Group
China Beststudy Education Group's Dividend Has Lacked Consistency
It's comforting to see that China Beststudy Education Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2020, the dividend has gone from CN¥0.0438 total annually to CN¥0.114. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
The Dividend Has Growth Potential
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. China Beststudy Education Group has seen EPS rising for the last five years, at 8.6% per annum. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.
China Beststudy Education Group Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 3 analysts we track are forecasting for China Beststudy Education Group for free with public analyst estimates for the company. 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.