Bank of Changsha (SHSE:601577) Will Pay A Larger Dividend Than Last Year At CN¥0.38

Bank of Changsha Co., Ltd. (SHSE:601577) has announced that it will be increasing its dividend from last year's comparable payment on the 16th of July to CN¥0.38. Based on this payment, the dividend yield for the company will be 4.7%, which is fairly typical for the industry.

View our latest analysis for Bank of Changsha

Bank of Changsha's Dividend Forecasted To Be Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Having paid out dividends for 5 years, Bank of Changsha has a good history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, Bank of Changsha's payout ratio sits at 20%, an extremely comfortable number that shows that it can pay its dividend.

The next 3 years are set to see EPS grow by 23.0%. Analysts forecast the future payout ratio could be 24% over the same time horizon, which is a number we think the company can maintain.

Bank of Changsha Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from an annual total of CN¥0.28 in 2019 to the most recent total annual payment of CN¥0.38. This works out to be a compound annual growth rate (CAGR) of approximately 6.3% a year over that time. Bank of Changsha has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Bank of Changsha has impressed us by growing EPS at 5.7% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Bank of Changsha's prospects of growing its dividend payments in the future.

Our Thoughts On Bank of Changsha's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. For instance, we've picked out 1 warning sign for Bank of Changsha that investors should take into consideration. Is Bank of Changsha not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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