Baoxiniao Holding (SZSE:002154) Is Paying Out A Larger Dividend Than Last Year

The board of Baoxiniao Holding Co., Ltd. (SZSE:002154) has announced that it will be paying its dividend of CN¥0.25 on the 16th of May, an increased payment from last year's comparable dividend. This takes the dividend yield to 4.3%, which shareholders will be pleased with.

View our latest analysis for Baoxiniao Holding

Baoxiniao Holding's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Baoxiniao Holding's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 49.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of CN¥0.0805 in 2014 to the most recent total annual payment of CN¥0.25. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Baoxiniao Holding has grown earnings per share at 42% per year over the past five years. Baoxiniao Holding is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Baoxiniao Holding Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Baoxiniao Holding is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Baoxiniao Holding that investors should know about before committing capital to this stock. Is Baoxiniao Holding not quite the opportunity you were looking for? Why not check out our selection of top 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.