Sichuan SwellfunLtd's (SHSE:600779) Upcoming Dividend Will Be Larger Than Last Year's

Sichuan Swellfun Co.,Ltd's (SHSE:600779) dividend will be increasing from last year's payment of the same period to CN¥0.915 on 1st of August. This will take the dividend yield to an attractive 2.6%, providing a nice boost to shareholder returns.

View our latest analysis for Sichuan SwellfunLtd

Sichuan SwellfunLtd's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Sichuan SwellfunLtd was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 54.4%. If the dividend continues on this path, the payout ratio could be 24% by next year, which we think can be pretty sustainable going forward.

Sichuan SwellfunLtd's Dividend Has Lacked Consistency

Looking back, Sichuan SwellfunLtd's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the annual payment back then was CN¥0.075, compared to the most recent full-year payment of CN¥0.915. This implies that the company grew its distributions at a yearly rate of about 37% 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 Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Sichuan SwellfunLtd has been growing its earnings per share at 15% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Sichuan SwellfunLtd 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. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, Sichuan SwellfunLtd has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. Is Sichuan SwellfunLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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