Bosideng International Holdings (HKG:3998) Will Pay A Larger Dividend Than Last Year At CN¥0.22

Bosideng International Holdings Limited (HKG:3998) has announced that it will be increasing its periodic dividend on the 12th of September to CN¥0.22, which will be 10.0% higher than last year's comparable payment amount of CN¥0.20. This takes the dividend yield to 6.0%, which shareholders will be pleased with.

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Bosideng International Holdings' Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Bosideng International Holdings' dividend made up quite a large proportion of earnings but only of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to expand by 39.2%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 81% - on the higher side, but we wouldn't necessarily say this is unsustainable.

View our latest analysis for Bosideng International Holdings

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was CN¥0.045, compared to the most recent full-year payment of CN¥0.256. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Bosideng International Holdings Might Find It Hard To Grow Its Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Bosideng International Holdings has seen EPS rising for the last five years, at 22% 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.

Our Thoughts On Bosideng International Holdings' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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. We don't think Bosideng International Holdings is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign 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.