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

JNBY Design Limited's (HKG:3306) dividend will be increasing from last year's payment of the same period to CN¥0.93 on 17th of November. This takes the dividend yield to 7.8%, which shareholders will be pleased with.

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JNBY Design's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, JNBY Design's dividend made up quite a large proportion of earnings but only 67% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, earnings per share is forecast to rise by 19.8% over the next year. 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.

See our latest analysis for JNBY Design

JNBY Design's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. Since 2017, the annual payment back then was CN¥0.479, compared to the most recent full-year payment of CN¥1.29. This works out to be a compound annual growth rate (CAGR) of approximately 13% 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

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. JNBY Design has seen EPS rising for the last five years, at 21% per annum. However, JNBY Design isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

JNBY Design Looks Like A Great Dividend Stock

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. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 JNBY Design that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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