Anhui Yingjia Distillery's (SHSE:603198) Dividend Will Be Increased To CN¥1.30

The board of Anhui Yingjia Distillery Co., Ltd. (SHSE:603198) has announced that it will be increasing its dividend by 18% on the 6th of June to CN¥1.30, up from last year's comparable payment of CN¥1.10. Although the dividend is now higher, the yield is only 1.6%, which is below the industry average.

View our latest analysis for Anhui Yingjia Distillery

Anhui Yingjia Distillery's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Anhui Yingjia Distillery was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 71.4%. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

Anhui Yingjia Distillery Is Still Building Its Track Record

Anhui Yingjia Distillery's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2015, the dividend has gone from CN¥0.40 total annually to CN¥1.10. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Anhui Yingjia Distillery has been growing its earnings per share at 26% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Anhui Yingjia Distillery 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. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Anhui Yingjia Distillery that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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