Fu Shou Yuan International Group (HKG:1448) Is Increasing Its Dividend To CN¥0.0906

Fu Shou Yuan International Group Limited (HKG:1448) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of October to CN¥0.0906. Although the dividend is now higher, the yield is only 3.0%, which is below the industry average.

View our latest analysis for Fu Shou Yuan International Group

Fu Shou Yuan International Group's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Fu Shou Yuan International Group's dividend was comfortably covered by both cash flow and earnings. 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 rise by 35.2% over the next year. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.

Fu Shou Yuan International Group Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 9 years was CN¥0.031 in 2014, and the most recent fiscal year payment was CN¥0.167. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. Fu Shou Yuan International Group has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Fu Shou Yuan International Group has been growing its earnings per share at 13% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Fu Shou Yuan International Group Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 1 warning sign for Fu Shou Yuan International Group 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.

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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.