Shenzhen Laibao Hi-Tech (SZSE:002106) Is Increasing Its Dividend To CN¥0.25

Shenzhen Laibao Hi-Tech Co., Ltd.'s (SZSE:002106) dividend will be increasing from last year's payment of the same period to CN¥0.25 on 20th of June. This takes the dividend yield to 2.3%, which shareholders will be pleased with.

See our latest analysis for Shenzhen Laibao Hi-Tech

Shenzhen Laibao Hi-Tech's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Shenzhen Laibao Hi-Tech's dividend was comfortably covered by both cash flow and earnings. 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 13.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from CN¥0.10 total annually to CN¥0.25. This implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Shenzhen Laibao Hi-Tech has grown earnings per share at 13% per year over the past five years. Shenzhen Laibao Hi-Tech definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Shenzhen Laibao Hi-Tech Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Shenzhen Laibao Hi-Tech is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Shenzhen Laibao Hi-Tech that investors should take into consideration. 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.

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