CMBC Capital Holdings (HKG:1141) Is Paying Out A Larger Dividend Than Last Year

The board of CMBC Capital Holdings Limited (HKG:1141) has announced that it will be increasing its dividend on the 29th of July to HK$0.075. This takes the annual payment to 3.6% of the current stock price, which is about average for the industry.

See our latest analysis for CMBC Capital Holdings

CMBC Capital Holdings' Earnings Easily Cover the Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, CMBC Capital Holdings' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 77.7% 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 17% by next year, which we think can be pretty sustainable going forward.

CMBC Capital Holdings' Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2019, the first annual payment was HK$0.08, compared to the most recent full-year payment of HK$0.075. Doing the maths, this is a decline of about 2.2% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

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. CMBC Capital Holdings has seen EPS rising for the last five years, at 78% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like CMBC Capital Holdings' Dividend

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 in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Case in point: We've spotted 4 warning signs for CMBC Capital Holdings (of which 1 is a bit concerning!) you should know about. Is CMBC Capital Holdings 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.