China Taiping Insurance Holdings Company Limited's (HKG:966) dividend will be increasing from last year's payment of the same period to HK$0.35 on 22nd of July. This takes the annual payment to 3.4% of the current stock price, which unfortunately is below what the industry is paying.
China Taiping Insurance Holdings' Future Dividend Projections Appear Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. However, China Taiping Insurance Holdings' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 44.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 14%, which is in the range that makes us comfortable with the sustainability of the dividend.
See our latest analysis for China Taiping Insurance Holdings
China Taiping Insurance Holdings' Dividend Has Lacked Consistency
China Taiping Insurance Holdings has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the annual payment back then was HK$0.10, compared to the most recent full-year payment of HK$0.35. This implies that the company grew its distributions at a yearly rate of about 17% 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'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. China Taiping Insurance Holdings has seen earnings per share falling at 3.4% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
Our Thoughts On China Taiping Insurance Holdings' Dividend
Overall, we always like to see the dividend being raised, but we don't think China Taiping Insurance Holdings will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for China Taiping Insurance Holdings that investors should know about before committing capital to this stock. 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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