Shandong Shengli (SZSE:000407) Is Paying Out A Larger Dividend Than Last Year

Shandong Shengli Co., Ltd. (SZSE:000407) has announced that it will be increasing its dividend from last year's comparable payment on the 25th of July to CN¥0.055. Although the dividend is now higher, the yield is only 2.1%, which is below the industry average.

Check out our latest analysis for Shandong Shengli

Shandong Shengli's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, Shandong Shengli's earnings easily 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 7.3% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

Shandong Shengli's Dividend Has Lacked Consistency

Shandong Shengli has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of CN¥0.02 in 2016 to the most recent total annual payment of CN¥0.055. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

We Could See Shandong Shengli's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Shandong Shengli has impressed us by growing EPS at 7.3% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Shandong Shengli's prospects of growing its dividend payments in the future.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. Just as an example, we've come across 3 warning signs for Shandong Shengli you should be aware of, and 2 of them are a bit unpleasant. 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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