China Xinhua Education Group (HKG:2779) Has Announced That It Will Be Increasing Its Dividend To HK$0.11

The board of China Xinhua Education Group Limited (HKG:2779) has announced that it will be increasing its dividend on the 6th of July to HK$0.11. This takes the dividend yield from 8.0% to 8.0%, which shareholders will be pleased with.

See our latest analysis for China Xinhua Education Group

China Xinhua Education Group's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, China Xinhua Education Group was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 8.9% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.

China Xinhua Education Group Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The first annual payment during the last 3 years was CN¥0.048 in 2019, and the most recent fiscal year payment was CN¥0.088. This means that it has been growing its distributions at 22% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

China Xinhua Education Group Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that China Xinhua Education Group has grown earnings per share at 8.9% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

China Xinhua Education 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. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for China Xinhua Education Group that you should be aware of before investing. 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.