Bank of Communications' (HKG:3328) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Bank of Communications Co., Ltd. (HKG:3328) has announced that it will be paying its dividend of CN¥0.4111 on the 31st of July, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 6.6% is only a modest boost to shareholder returns.

View our latest analysis for Bank of Communications

Bank of Communications' Dividend Forecasted To Be Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Having distributed dividends for at least 10 years, Bank of Communications has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 33%, which means that Bank of Communications would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 14.0%. Analysts forecast the future payout ratio could be 31% over the same time horizon, which is a number we think the company can maintain.

Bank of Communications Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was CN¥0.26, compared to the most recent full-year payment of CN¥0.375. This works out to be a compound annual growth rate (CAGR) of approximately 3.7% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Earnings have grown at around 3.7% a year for the past five years, which isn't massive but still better than seeing them shrink. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

We Really Like Bank of Communications' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 15 Bank of Communications analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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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