Shenzhou International Group Holdings (HKG:2313) Is Paying Out A Larger Dividend Than Last Year

Shenzhou International Group Holdings Limited (HKG:2313) has announced that it will be increasing its dividend on the 28th of September to HK$1.06. The announced payment will take the dividend yield to 1.3%, which is in line with the average for the industry.

See our latest analysis for Shenzhou International Group Holdings

Shenzhou International Group Holdings' Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. But before making this announcement, Shenzhou International Group Holdings' earnings quite easily covered the dividend. The business is earning enough to make the dividend feasible, but the cash payout ratio of 79% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

The next year is set to see EPS grow by 34.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 59% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The dividend has gone from CN¥0.29 in 2011 to the most recent annual payment of CN¥1.81. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Shenzhou International Group Holdings has grown earnings per share at 11% per year over the past five years. Shenzhou International Group Holdings definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Shenzhou International Group Holdings' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Shenzhou International Group Holdings has been making. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Shenzhou International Group Holdings that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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