Guangxi LiuYao Group (SHSE:603368) Is Increasing Its Dividend To CN¥0.60

The board of Guangxi LiuYao Group Co., Ltd (SHSE:603368) has announced that it will be paying its dividend of CN¥0.60 on the 11th of June, an increased payment from last year's comparable dividend. This takes the dividend yield to 2.8%, which shareholders will be pleased with.

Check out our latest analysis for Guangxi LiuYao Group

Guangxi LiuYao Group's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Guangxi LiuYao Group 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.

Over the next year, EPS is forecast to expand by 52.0%. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.

Guangxi LiuYao Group Doesn't Have A Long Payment History

It is great to see that Guangxi LiuYao Group has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The annual payment during the last 9 years was CN¥0.122 in 2015, and the most recent fiscal year payment was CN¥0.60. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. 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.

Guangxi LiuYao Group Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Guangxi LiuYao Group has seen EPS rising for the last five years, at 7.1% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Guangxi LiuYao Group's prospects of growing its dividend payments in the future.

We should note that Guangxi LiuYao Group has issued stock equal to 10% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Our Thoughts On Guangxi LiuYao Group's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Guangxi LiuYao Group that you should be aware of before investing. Is Guangxi LiuYao Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.