COFCO Capital Holdings' (SZSE:002423) Shareholders Will Receive A Bigger Dividend Than Last Year

COFCO Capital Holdings Co., Ltd. (SZSE:002423) will increase its dividend from last year's comparable payment on the 11th of July to CN¥0.133. This takes the annual payment to 1.8% of the current stock price, which is about average for the industry.

Check out our latest analysis for COFCO Capital Holdings

COFCO Capital Holdings' Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, COFCO Capital Holdings' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 21.0% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.

COFCO Capital Holdings' Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2020, the annual payment back then was CN¥0.028, compared to the most recent full-year payment of CN¥0.133. This means that it has been growing its distributions at 48% per annum 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.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. COFCO Capital Holdings has impressed us by growing EPS at 21% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like COFCO Capital Holdings' Dividend

Overall, a dividend increase is always good, and we think that COFCO Capital Holdings is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 COFCO Capital Holdings that investors need to be conscious of moving forward. Is COFCO Capital Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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