Jiangsu Yanghe Distillery (SZSE:002304) Has Announced That It Will Be Increasing Its Dividend To CN¥4.66

Jiangsu Yanghe Distillery Co., Ltd.'s (SZSE:002304) dividend will be increasing from last year's payment of the same period to CN¥4.66 on 26th of June. This makes the dividend yield 5.4%, which is above the industry average.

See our latest analysis for Jiangsu Yanghe Distillery

Jiangsu Yanghe Distillery's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite comfortably covered by Jiangsu Yanghe Distillery's earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Looking forward, earnings per share is forecast to rise by 35.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 55%, which is in the range that makes us comfortable with the sustainability of the dividend.

Jiangsu Yanghe Distillery Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from CN¥1.43 total annually to CN¥4.66. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Jiangsu Yanghe Distillery May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, Jiangsu Yanghe Distillery has only grown its earnings per share at 3.5% per annum over the past five years. Growth of 3.5% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Jiangsu Yanghe Distillery's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 21 Jiangsu Yanghe Distillery analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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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