China Xinhua Education Group (HKG:2779) Is Paying Out A Larger Dividend Than Last Year

China Xinhua Education Group Limited (HKG:2779) will increase its dividend on the 6th of July to HK$0.11. This takes the dividend yield from 7.6% to 7.8%, which shareholders will be pleased with.

See our latest analysis for China Xinhua Education Group

China Xinhua Education Group's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, China Xinhua Education Group's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 8.9% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

China Xinhua Education Group Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The first annual payment during the last 3 years was CN¥0.048 in 2019, and the most recent fiscal year payment was CN¥0.087. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. China Xinhua Education 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.

We Could See China Xinhua Education Group's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. China Xinhua Education Group has seen EPS rising for the last five years, at 8.9% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

China Xinhua Education Group Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that China Xinhua Education Group is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for China Xinhua Education Group that investors should take into consideration. Is China Xinhua Education Group not quite the opportunity you were looking for? Why not check out our selection of top 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.