CITIC Resources Holdings' (HKG:1205) Dividend Will Be Increased To HK$0.026

The board of CITIC Resources Holdings Limited (HKG:1205) has announced that the dividend on 17th of July will be increased to HK$0.026, which will be 4.0% higher than last year's payment of HK$0.025 which covered the same period. Based on this payment, the dividend yield for the company will be 6.2%, which is fairly typical for the industry.

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CITIC Resources Holdings' Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, CITIC Resources Holdings' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 0.9% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 39%, which we are pretty comfortable with and we think is feasible on an earnings basis.

View our latest analysis for CITIC Resources Holdings

CITIC Resources Holdings' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of HK$0.015 in 2017 to the most recent total annual payment of HK$0.026. This means that it has been growing its distributions at 7.1% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. CITIC Resources Holdings might have put its house in order since then, but we remain cautious.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Unfortunately, CITIC Resources Holdings' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

In Summary

Overall, we always like to see the dividend being raised, but we don't think CITIC Resources Holdings will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for CITIC Resources Holdings that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.