CSSC (Hong Kong) Shipping (HKG:3877) Is Due To Pay A Dividend Of HK$0.06

CSSC (Hong Kong) Shipping Company Limited (HKG:3877) will pay a dividend of HK$0.06 on the 29th of July. This means that the annual payment will be 6.3% of the current stock price, which is in line with the average for the industry.

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

CSSC (Hong Kong) Shipping's Earnings Easily Cover the Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, CSSC (Hong Kong) Shipping's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 18.0% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 35% by next year, which is in a pretty sustainable range.

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

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 2019, the first annual payment was HK$0.06, compared to the most recent full-year payment of HK$0.09. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year 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

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that CSSC (Hong Kong) Shipping has grown earnings per share at 12% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think CSSC (Hong Kong) Shipping is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, CSSC (Hong Kong) Shipping has 4 warning signs (and 2 which are a bit concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.