China State Construction International Holdings' (HKG:3311) Dividend Will Be Increased To HK$0.34

China State Construction International Holdings Limited's (HKG:3311) dividend will be increasing from last year's payment of the same period to HK$0.34 on 10th of October. This makes the dividend yield about the same as the industry average at 5.6%.

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China State Construction International Holdings' Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, China State Construction International Holdings was paying a whopping 352% as a dividend, but this only made up 33% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Over the next year, EPS is forecast to expand by 32.2%. If the dividend continues on this path, the payout ratio could be 28% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for China State Construction International Holdings

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of HK$0.26 in 2015 to the most recent total annual payment of HK$0.615. This means that it has been growing its distributions at 9.0% 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. China State Construction International Holdings might have put its house in order since then, but we remain cautious.

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 China State Construction International Holdings has been growing its earnings per share at 11% a year over the past five years. China State Construction International Holdings definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think China State Construction International Holdings will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think China State Construction International Holdings is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for China State Construction International Holdings (1 is a bit unpleasant!) that you should be aware of before investing. Is China State Construction International Holdings 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.