Shanghai Pudong Development Bank (SHSE:600000) Is Increasing Its Dividend To CN¥0.321

Shanghai Pudong Development Bank Co., Ltd.'s (SHSE:600000) periodic dividend will be increasing on the 18th of July to CN¥0.321, with investors receiving 0.3% more than last year's CN¥0.32. Even though the dividend went up, the yield is still quite low at only 3.6%.

See our latest analysis for Shanghai Pudong Development Bank

Shanghai Pudong Development Bank's Payment Expected To Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Having distributed dividends for at least 10 years, Shanghai Pudong Development Bank has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Shanghai Pudong Development Bank's payout ratio of 29% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 35.7% over the next 3 years. Analysts estimate the future payout ratio will be 29% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

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 dividend has gone from CN¥0.462 total annually to CN¥0.321. Doing the maths, this is a decline of about 3.6% per year. 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.

Dividend Growth Potential Is Shaky

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. Shanghai Pudong Development Bank's EPS has fallen by approximately 11% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Our Thoughts On Shanghai Pudong Development Bank's Dividend

Overall, we always like to see the dividend being raised, but we don't think Shanghai Pudong Development Bank will make a great income stock. While Shanghai Pudong Development Bank is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Shanghai Pudong Development Bank that you should be aware of before investing. 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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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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