China Everbright Bank's (SHSE:601818) Shareholders Will Receive A Smaller Dividend Than Last Year

The board of China Everbright Bank Company Limited (SHSE:601818) has announced that the dividend on 24th of July will be reduced by 8.9% from last year's CN¥0.19 to CN¥0.173. The dividend yield will be in the average range for the industry at 5.6%.

Check out our latest analysis for China Everbright Bank

China Everbright Bank's Payment Expected To Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

China Everbright Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on China Everbright Bank's last earnings report, the payout ratio is at a decent 28%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 6.7% over the next 3 years. Analysts forecast the future payout ratio could be 29% over the same time horizon, which is a number we think the company can maintain.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was CN¥0.172 in 2014, and the most recent fiscal year payment was CN¥0.19. This means that it has been growing its distributions at 1.0% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. China Everbright Bank hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On China Everbright Bank's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments China Everbright Bank has been making. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for China Everbright Bank that investors need to be conscious of moving forward. 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.

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