Bosideng International Holdings (HKG:3998) Is Increasing Its Dividend To CN¥0.20

Bosideng International Holdings Limited's (HKG:3998) dividend will be increasing from last year's payment of the same period to CN¥0.20 on 13th of September. This makes the dividend yield 6.0%, which is above the industry average.

See our latest analysis for Bosideng International Holdings

Bosideng International Holdings' Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, Bosideng International Holdings was paying out 81% of earnings, but a comparatively small of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

The next year is set to see EPS grow by 50.3%. 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. The dividend has gone from an annual total of CN¥0.101 in 2014 to the most recent total annual payment of CN¥0.233. This implies that the company grew its distributions at a yearly rate of about 8.7% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Bosideng International Holdings Might Find It Hard To Grow Its Dividend

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. Bosideng International Holdings has seen EPS rising for the last five years, at 25% per annum. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Bosideng International Holdings hasn't been doing.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Bosideng International Holdings' payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 2 warning signs for Bosideng International Holdings 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com