Thinkingdom Media Group's (SHSE:603096) Dividend Will Be Increased To CN¥0.90

Thinkingdom Media Group Ltd.'s (SHSE:603096) dividend will be increasing from last year's payment of the same period to CN¥0.90 on 7th of June. This makes the dividend yield 5.1%, which is above the industry average.

See our latest analysis for Thinkingdom Media Group

Thinkingdom Media Group's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Thinkingdom Media Group was paying out 89% of earnings and more than 75% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

The next year is set to see EPS grow by 31.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 73%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Thinkingdom Media Group Is Still Building Its Track Record

Thinkingdom Media Group'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. The annual payment during the last 7 years was CN¥0.30 in 2017, and the most recent fiscal year payment was CN¥0.90. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. Thinkingdom Media Group has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Dividend Growth Is Doubtful

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. In the last five years, Thinkingdom Media Group's earnings per share has shrunk at approximately 6.8% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Thinkingdom Media Group's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think Thinkingdom Media Group is a great stock to add to your portfolio if income is your focus.

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 instance, we've picked out 1 warning sign for Thinkingdom Media Group that investors should take into consideration. Is Thinkingdom Media Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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