Harbin Electric (HKG:1133) Will Pay A Larger Dividend Than Last Year At CN¥0.0573

Harbin Electric Company Limited (HKG:1133) has announced that it will be increasing its dividend from last year's comparable payment on the 24th of July to CN¥0.0573. Even though the dividend went up, the yield is still quite low at only 2.1%.

See our latest analysis for Harbin Electric

Harbin Electric's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Harbin Electric's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 120.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 8.5% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from CN¥0.08 total annually to CN¥0.0529. The dividend has shrunk at around 4.1% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Harbin Electric has been growing its earnings per share at 44% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

An additional note is that the company has been raising capital by issuing stock equal to 31% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

We Really Like Harbin Electric's Dividend

Overall, a dividend increase is always good, and we think that Harbin Electric is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Harbin Electric that investors should know about before committing capital to this stock. Is Harbin Electric 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.