Fosun International (HKG:656) Will Pay A Larger Dividend Than Last Year At HK$0.30

Fosun International Limited's (HKG:656) dividend will be increasing to HK$0.30 on 15th of July. Although the dividend is now higher, the yield is only 3.6%, which is below the industry average.

See our latest analysis for Fosun International

Fosun International's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Fosun International was easily earning enough to cover the dividend. 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 28.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 21%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the dividend has gone from CN¥0.13 to CN¥0.24. This works out to be a compound annual growth rate (CAGR) of approximately 6.8% a year 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. Fosun International might have put its house in order since then, but we remain cautious.

Fosun International May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, Fosun International's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. While growth may be thin on the ground, Fosun International could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. Just as an example, we've come across 3 warning signs for Fosun International you should be aware of, and 1 of them is significant. Is Fosun International 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.