Hefei Department Store GroupLtd (SZSE:000417) Is Paying Out A Larger Dividend Than Last Year

Hefei Department Store Group Co.,Ltd's (SZSE:000417) dividend will be increasing from last year's payment of the same period to CN¥0.11 on 11th of July. 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 Hefei Department Store GroupLtd

Hefei Department Store GroupLtd's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Hefei Department Store GroupLtd was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 3.4% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was CN¥0.18, compared to the most recent full-year payment of CN¥0.11. Doing the maths, this is a decline of about 4.8% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been crawling upwards at 3.4% per year. While EPS growth is quite low, Hefei Department Store GroupLtd has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Hefei Department Store GroupLtd's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Hefei Department Store GroupLtd that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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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