Jiangsu King's Luck Brewery Ltd (SHSE:603369) Is Paying Out A Larger Dividend Than Last Year

Jiangsu King's Luck Brewery Joint-Stock Co.,Ltd. (SHSE:603369) will increase its dividend from last year's comparable payment on the 12th of June to CN¥1.00. This takes the annual payment to 1.9% of the current stock price, which is about average for the industry.

View our latest analysis for Jiangsu King's Luck Brewery Ltd

Jiangsu King's Luck Brewery Ltd's 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. Based on the last payment, Jiangsu King's Luck Brewery Ltd was paying only paying out a fraction of earnings, but the payment was a massive 245% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Over the next year, EPS is forecast to expand by 52.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.

Jiangsu King's Luck Brewery Ltd Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2015, the dividend has gone from CN¥0.156 total annually to CN¥1.00. This works out to be a compound annual growth rate (CAGR) of approximately 23% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Jiangsu King's Luck Brewery Ltd has grown earnings per share at 22% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Jiangsu King's Luck Brewery Ltd is earning enough to cover the payments, the cash flows are lacking. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Jiangsu King's Luck Brewery Ltd has 2 warning signs (and 1 which can't be ignored) we think you should know about. 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.