Wangfujing Group (SHSE:600859) Has Announced That It Will Be Increasing Its Dividend To CN¥0.20

The board of Wangfujing Group Co., Ltd. (SHSE:600859) has announced that it will be paying its dividend of CN¥0.20 on the 10th of July, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 1.5%.

View our latest analysis for Wangfujing Group

Wangfujing Group's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Wangfujing Group was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 62.3% over the next year. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of CN¥0.539 in 2014 to the most recent total annual payment of CN¥0.20. This works out to be a decline of approximately 9.4% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Wangfujing Group's earnings per share has shrunk at 16% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Wangfujing 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. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Wangfujing Group that investors should know about before committing capital to this stock. Is Wangfujing Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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