JNBY Design's (HKG:3306) Upcoming Dividend Will Be Larger Than Last Year's

The board of JNBY Design Limited (HKG:3306) has announced that it will be increasing its dividend on the 15th of November to HK$1.11. This will take the annual payment from 6.1% to 8.3% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for JNBY Design

JNBY Design Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, JNBY Design was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to fall by 0.8% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 113%, which could put the dividend under pressure if earnings don't start to improve.

JNBY Design's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The dividend has gone from CN¥0.48 in 2017 to the most recent annual payment of CN¥0.92. This works out to be a compound annual growth rate (CAGR) of approximately 18% 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.

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 impressed us by growing EPS at 16% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like JNBY Design's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

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. For instance, we've picked out 3 warning signs for JNBY Design that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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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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