China Lilang (HKG:1234) Has Announced A Dividend Of CN¥0.16

China Lilang Limited (HKG:1234) has announced that it will pay a dividend of CN¥0.16 per share on the 23rd of September. However, the dividend yield of 6.9% is still a decent boost to shareholder returns.

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China Lilang's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite comfortably covered by China Lilang's earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Looking forward, earnings per share is forecast to rise by 46.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 53% by next year, which is in a pretty sustainable range.

See our latest analysis for China Lilang

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was CN¥0.299 in 2015, and the most recent fiscal year payment was CN¥0.237. The dividend has shrunk at around 2.3% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Is Doubtful

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, China Lilang's earnings per share has shrunk at approximately 9.4% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On China Lilang's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments China Lilang has been making. This company is not in the top tier of income providing stocks.

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 1 warning sign for China Lilang 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.