CSSC (Hong Kong) Shipping (HKG:3877) Has Announced That It Will Be Increasing Its Dividend To HK$0.07

CSSC (Hong Kong) Shipping Company Limited (HKG:3877) will increase its dividend from last year's comparable payment on the 28th of July to HK$0.07. This takes the annual payment to 7.2% of the current stock price, which is about average for the industry.

Check out our latest analysis for CSSC (Hong Kong) Shipping

CSSC (Hong Kong) Shipping's 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, CSSC (Hong Kong) Shipping's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 42.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% by next year, which is in a pretty sustainable range.

CSSC (Hong Kong) Shipping Doesn't Have A Long Payment History

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. Since 2019, the annual payment back then was HK$0.06, compared to the most recent full-year payment of HK$0.10. This means that it has been growing its distributions at 14% per annum over that time. CSSC (Hong Kong) Shipping 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. CSSC (Hong Kong) Shipping has impressed us by growing EPS at 16% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for CSSC (Hong Kong) Shipping's prospects of growing its dividend payments in the future.

We Really Like CSSC (Hong Kong) Shipping's Dividend

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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for CSSC (Hong Kong) Shipping (of which 1 is significant!) you should know about. Is CSSC (Hong Kong) Shipping 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.