China PengFei Group (HKG:3348) Will Pay A Larger Dividend Than Last Year At CN¥0.0945

The board of China PengFei Group Limited (HKG:3348) has announced that it will be paying its dividend of CN¥0.0945 on the 18th of July, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 8.8%, providing a nice boost to shareholder returns.

Check out our latest analysis for China PengFei Group

China PengFei Group's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, China PengFei Group was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 8.1% over the next 12 months. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

China PengFei Group Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The annual payment during the last 4 years was CN¥0.05 in 2020, and the most recent fiscal year payment was CN¥0.0857. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. China PengFei Group has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

China PengFei Group Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that China PengFei Group has grown earnings per share at 8.1% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

China PengFei Group Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for China PengFei Group 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.