Hithink RoyalFlush Information Network (SZSE:300033) Is Increasing Its Dividend To CN¥3.00

The board of Hithink RoyalFlush Information Network Co., Ltd. (SZSE:300033) has announced that it will be paying its dividend of CN¥3.00 on the 28th of March, an increased payment from last year's comparable dividend. This takes the annual payment to 1.0% of the current stock price, which unfortunately is below what the industry is paying.

Hithink RoyalFlush Information Network's Future Dividend Projections Appear Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Before this announcement, Hithink RoyalFlush Information Network was paying out 88% of earnings, but a comparatively small 73% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

The next year is set to see EPS grow by 75.8%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 61% which brings it into quite a comfortable range.

View our latest analysis for Hithink RoyalFlush Information Network

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from CN¥0.015 total annually to CN¥3.00. This works out to be a compound annual growth rate (CAGR) of approximately 70% a year over that time. 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.

Dividend Growth Could Be Constrained

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. Hithink RoyalFlush Information Network has seen EPS rising for the last five years, at 15% per annum. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Hithink RoyalFlush Information Network that investors need to be conscious of moving forward. Is Hithink RoyalFlush Information Network 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.