Chongqing Rural Commercial Bank's (HKG:3618) Dividend Will Be Increased To HK$0.30

The board of Chongqing Rural Commercial Bank Co., Ltd. (HKG:3618) has announced that it will be increasing its dividend on the 8th of July to HK$0.30. This takes the dividend yield from 9.8% to 9.8%, which shareholders will be pleased with.

Check out our latest analysis for Chongqing Rural Commercial Bank

Chongqing Rural Commercial Bank'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, Chongqing Rural Commercial Bank'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.

Over the next year, EPS is forecast to expand by 5.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

Chongqing Rural Commercial Bank Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was CN¥0.14 in 2012, and the most recent fiscal year payment was CN¥0.25. This means that it has been growing its distributions at 6.1% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Chongqing Rural Commercial Bank May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. However, Chongqing Rural Commercial Bank's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Chongqing Rural Commercial Bank's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Given that earnings are not growing, the dividend does not look nearly so attractive. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. Is Chongqing Rural Commercial Bank not quite the opportunity you were looking for? Why not check out our selection of top 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.