Guangdong Provincial Expressway Development's (SZSE:000429) Dividend Will Be Increased To CN¥0.547

Guangdong Provincial Expressway Development Co., Ltd. (SZSE:000429) will increase its dividend from last year's comparable payment on the 15th of July to CN¥0.547. This will take the dividend yield to an attractive 5.0%, providing a nice boost to shareholder returns.

View our latest analysis for Guangdong Provincial Expressway Development

Guangdong Provincial Expressway Development's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, Guangdong Provincial Expressway Development was paying out 70% of earnings, but a comparatively small 58% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to expand by 1.3%. If the dividend continues along recent trends, we estimate the payout ratio could reach 78%, which is on the higher side, but certainly still feasible.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from CN¥0.05 total annually to CN¥0.547. This means that it has been growing its distributions at 27% per annum over that time. Guangdong Provincial Expressway Development has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Guangdong Provincial Expressway Development May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Guangdong Provincial Expressway Development hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Guangdong Provincial Expressway Development's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Guangdong Provincial Expressway Development's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Guangdong Provincial Expressway Development is a great stock to add to your portfolio if income is your focus.

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. Taking the debate a bit further, we've identified 1 warning sign for Guangdong Provincial Expressway Development that investors need to be conscious of moving forward. 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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