CSSC (Hong Kong) Shipping's (HKG:3877) Shareholders Will Receive A Bigger Dividend Than Last Year

CSSC (Hong Kong) Shipping Company Limited's (HKG:3877) dividend will be increasing from last year's payment of the same period to HK$0.104 on 14th of July. Based on this payment, the dividend yield for the company will be 6.3%, which is fairly typical for the industry.

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CSSC (Hong Kong) Shipping's Projected Earnings Seem Likely To Cover Future Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, CSSC (Hong Kong) Shipping was easily earning enough to 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 22.7%. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

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

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

It is great to see that CSSC (Hong Kong) Shipping has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2019, the dividend has gone from HK$0.06 total annually to HK$0.134. This means that it has been growing its distributions at 14% per annum over that time. 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

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that CSSC (Hong Kong) Shipping has grown earnings per share at 16% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

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

Overall, a dividend increase is always good, and we think that CSSC (Hong Kong) Shipping is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for CSSC (Hong Kong) Shipping that you should be aware of before investing. 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.