ValiantLtd (SZSE:002643) Has Announced That It Will Be Increasing Its Dividend To CN¥0.30

Valiant Co.,Ltd (SZSE:002643) will increase its dividend on the 6th of June to CN¥0.30, which is 1.7% higher than last year's payment from the same period of CN¥0.295. This takes the annual payment to 2.6% of the current stock price, which is about average for the industry.

See our latest analysis for ValiantLtd

ValiantLtd's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, ValiantLtd's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise by 45.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

ValiantLtd Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from CN¥0.072 total annually to CN¥0.30. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

We Could See ValiantLtd's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that ValiantLtd has been growing its earnings per share at 6.8% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for ValiantLtd's prospects of growing its dividend payments in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think ValiantLtd will make a great income stock. While ValiantLtd 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. 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 ValiantLtd 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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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.