Beijing Haohua Energy Resource's (SHSE:601101) Dividend Will Be Increased To CN¥0.35

Beijing Haohua Energy Resource Co., Ltd.'s (SHSE:601101) dividend will be increasing from last year's payment of the same period to CN¥0.35 on 26th of June. This takes the annual payment to 3.6% of the current stock price, which unfortunately is below what the industry is paying.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Beijing Haohua Energy Resource's stock price has increased by 32% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Beijing Haohua Energy Resource

Beijing Haohua Energy Resource's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Beijing Haohua Energy Resource's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 55.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of CN¥0.115 in 2014 to the most recent total annual payment of CN¥0.35. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. 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.

The Dividend Has Growth Potential

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. Beijing Haohua Energy Resource has seen EPS rising for the last five years, at 9.6% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Beijing Haohua Energy Resource Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Beijing Haohua Energy Resource that investors should take into consideration. 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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