CSSC (Hong Kong) Shipping (HKG:3877) Will Pay A Dividend Of HK$0.03

The board of CSSC (Hong Kong) Shipping Company Limited (HKG:3877) has announced that it will pay a dividend on the 7th of October, with investors receiving HK$0.03 per share. Based on this payment, the dividend yield will be 6.9%, which is fairly typical for the industry.

View our latest analysis for CSSC (Hong Kong) Shipping

CSSC (Hong Kong) Shipping's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, CSSC (Hong Kong) Shipping was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to expand by 35.9%. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

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

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 3 years was HK$0.06 in 2019, and the most recent fiscal year payment was HK$0.09. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. 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.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. CSSC (Hong Kong) Shipping has seen EPS rising for the last five years, at 15% per annum. CSSC (Hong Kong) Shipping definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about CSSC (Hong Kong) Shipping's payments, as there could be some issues with sustaining them into the future. While CSSC (Hong Kong) Shipping is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, CSSC (Hong Kong) Shipping has 3 warning signs (and 2 which are a bit unpleasant) we think 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.