China Lilang (HKG:1234) Will Pay A Larger Dividend Than Last Year At HK$0.18

China Lilang Limited's (HKG:1234) dividend will be increasing to HK$0.18 on 24th of September. This will take the dividend yield from 9.2% to 9.2%, providing a nice boost to shareholder returns.

Check out our latest analysis for China Lilang

China Lilang's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, China Lilang was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 95% indicates it is more focused on returning cash to shareholders than growing the business.

Earnings per share is forecast to rise by 30.9% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 77% which is a bit high but can definitely be sustainable.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2011, the dividend has gone from CN¥0.17 to CN¥0.37. This means that it has been growing its distributions at 8.2% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. China Lilang hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On China Lilang's Dividend

In summary, while it's always good to see the dividend being raised, we don't think China Lilang's payments are rock solid. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for China Lilang that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

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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.
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