SINOPEC Engineering (Group)'s (HKG:2386) Dividend Will Be CN¥0.1636

The board of SINOPEC Engineering (Group) Co., Ltd. (HKG:2386) has announced that it will pay a dividend on the 28th of October, with investors receiving CN¥0.1636 per share. This makes the dividend yield about the same as the industry average at 6.7%.

View our latest analysis for SINOPEC Engineering (Group)

SINOPEC Engineering (Group)'s Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, SINOPEC Engineering (Group)'s earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 36.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 58%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was CN¥0.268, compared to the most recent full-year payment of CN¥0.343. This implies that the company grew its distributions at a yearly rate of about 2.5% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

We Could See SINOPEC Engineering (Group)'s Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. SINOPEC Engineering (Group) has impressed us by growing EPS at 5.8% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think SINOPEC Engineering (Group)'s payments are rock solid. While SINOPEC Engineering (Group) is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for SINOPEC Engineering (Group) (1 is significant!) that you should be aware of before investing. 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.