Shanghai Gench Education Group (HKG:1525) Is Due To Pay A Dividend Of CN¥0.10

The board of Shanghai Gench Education Group Limited (HKG:1525) has announced that it will pay a dividend of CN¥0.10 per share on the 24th of October. Based on this payment, the dividend yield will be 6.8%, which is fairly typical for the industry.

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Shanghai Gench Education Group's Payment Could Potentially Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, Shanghai Gench Education Group's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 6.1% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.

See our latest analysis for Shanghai Gench Education Group

Shanghai Gench Education Group Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2021, the annual payment back then was CN¥0.145, compared to the most recent full-year payment of CN¥0.182. This implies that the company grew its distributions at a yearly rate of about 5.8% over that duration. Shanghai Gench Education Group has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Shanghai Gench Education Group has seen EPS rising for the last five years, at 6.1% per annum. Shanghai Gench Education Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, a consistent dividend is a good thing, and we think that Shanghai Gench Education Group has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Shanghai Gench Education Group stock. 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.