Shanxi Xinghuacun Fen Wine FactoryLtd's (SHSE:600809) Upcoming Dividend Will Be Larger Than Last Year's

Shanxi Xinghuacun Fen Wine Factory Co.,Ltd. (SHSE:600809) will increase its dividend from last year's comparable payment on the 5th of July to CN¥4.37. This makes the dividend yield about the same as the industry average at 2.1%.

See our latest analysis for Shanxi Xinghuacun Fen Wine FactoryLtd

Shanxi Xinghuacun Fen Wine FactoryLtd's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend was quite easily covered by Shanxi Xinghuacun Fen Wine FactoryLtd's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 62.4% over the next year. 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 has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was CN¥0.25 in 2014, and the most recent fiscal year payment was CN¥4.37. This means that it has been growing its distributions at 33% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

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 Shanxi Xinghuacun Fen Wine FactoryLtd has been growing its earnings per share at 48% a year over the past five years. Shanxi Xinghuacun Fen Wine FactoryLtd is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Shanxi Xinghuacun Fen Wine FactoryLtd 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.

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. As an example, we've identified 1 warning sign for Shanxi Xinghuacun Fen Wine FactoryLtd that you should be aware of before investing. 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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