Kweichow Moutai (SHSE:600519) Is Due To Pay A Dividend Of CN¥23.88

The board of Kweichow Moutai Co., Ltd. (SHSE:600519) has announced that it will pay a dividend of CN¥23.88 per share on the 20th of December. This will take the dividend yield to an attractive 3.2%, providing a nice boost to shareholder returns.

Check out our latest analysis for Kweichow Moutai

Kweichow Moutai's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Kweichow Moutai's dividend was only 47% of earnings, however it was paying out 109% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

The next year is set to see EPS grow by 45.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 68% by next year, which is in a pretty sustainable range.

Kweichow Moutai Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from CN¥3.61 total annually to CN¥49.98. This means that it has been growing its distributions at 30% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Kweichow Moutai has grown earnings per share at 15% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Taking the debate a bit further, we've identified 1 warning sign for Kweichow Moutai that investors need to be conscious of moving forward. Is Kweichow Moutai 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.