China CITIC Bank's (HKG:998) Upcoming Dividend Will Be Larger Than Last Year's

China CITIC Bank Corporation Limited (HKG:998) has announced that it will be increasing its dividend from last year's comparable payment on the 20th of July to CN¥0.3601. This takes the annual payment to 9.0% of the current stock price, which is about average for the industry.

See our latest analysis for China CITIC Bank

China CITIC Bank's Dividend Forecasted To Be Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Having distributed dividends for at least 10 years, China CITIC Bank has a long history of paying out a part of its earnings to shareholders. Based on China CITIC Bank's last earnings report, the payout ratio is at a decent 27%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 23.4%. Analysts forecast the future payout ratio could be 30% over the same time horizon, which is a number we think the company can maintain.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of CN¥0.15 in 2013 to the most recent total annual payment of CN¥0.33. This implies that the company grew its distributions at a yearly rate of about 8.2% 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.

We Could See China CITIC Bank's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. China CITIC Bank has seen EPS rising for the last five years, at 7.0% per annum. China CITIC Bank definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On China CITIC Bank's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, China CITIC Bank has 2 warning signs (and 1 which is significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.