Shenzhou International Group Holdings (HKG:2313) Has Announced That It Will Be Increasing Its Dividend To CN¥1.08

Shenzhou International Group Holdings Limited's (HKG:2313) dividend will be increasing from last year's payment of the same period to CN¥1.08 on 20th of June. This takes the annual payment to 2.7% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Shenzhou International Group Holdings

Shenzhou International Group Holdings' Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Shenzhou International Group Holdings was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 62.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 46%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 2014, the annual payment back then was CN¥0.599, compared to the most recent full-year payment of CN¥1.87. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Shenzhou International Group Holdings May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Shenzhou International Group Holdings' EPS was effectively flat over the past five years, which could stop the company from paying more every year. Growth of 0.07% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This could mean the dividend doesn't have the growth potential we look for going into the future.

Our Thoughts On Shenzhou International Group Holdings' Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 28 analysts we track are forecasting for Shenzhou International Group Holdings for free with public analyst estimates for the company. 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.