JNBY Design (HKG:3306) Has Announced That It Will Be Increasing Its Dividend To CN¥0.93

JNBY Design Limited (HKG:3306) will increase its dividend from last year's comparable payment on the 17th of November to CN¥0.93. This makes the dividend yield 7.3%, which is above the industry average.

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JNBY Design's Payment Could Potentially Have 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, JNBY Design's dividend made up quite a large proportion of earnings but only 67% of free cash flows. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 18.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 73% by next year, which is in a pretty sustainable range.

View our latest analysis for JNBY Design

JNBY Design's Dividend Has Lacked Consistency

It's comforting to see that JNBY Design has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 8 years was CN¥0.479 in 2017, and the most recent fiscal year payment was CN¥1.29. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. JNBY Design has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. JNBY Design has seen EPS rising for the last five years, at 21% per annum. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why JNBY Design is not retaining those earnings to reinvest in growth.

We Really Like JNBY Design's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for JNBY Design 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.