Bosideng International Holdings' (HKG:3998) Dividend Will Be Increased To CN¥0.20

The board of Bosideng International Holdings Limited (HKG:3998) has announced that it will be paying its dividend of CN¥0.20 on the 13th of September, an increased payment from last year's comparable dividend. This makes the dividend yield 6.7%, which is above the industry average.

See our latest analysis for Bosideng International Holdings

Bosideng International Holdings' Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, Bosideng International Holdings was paying out 81% of earnings, but a comparatively small of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 50.5% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 72% which would be quite comfortable going to take the dividend forward.

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 dividend has gone from CN¥0.045 total annually to CN¥0.232. This means that it has been growing its distributions at 18% per annum 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.

Bosideng International Holdings Might Find It Hard To Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Bosideng International Holdings has been growing its earnings per share at 25% a year over the past five years. However, Bosideng International Holdings isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

Our Thoughts On Bosideng International Holdings' Dividend

Overall, we always like to see the dividend being raised, but we don't think Bosideng International Holdings will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

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. For instance, we've picked out 2 warning signs for Bosideng International Holdings that investors should take into consideration. 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.

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