CNOOC's (HKG:883) Dividend Will Be CN¥0.66

The board of CNOOC Limited (HKG:883) has announced that it will pay a dividend of CN¥0.66 per share on the 12th of July. This payment takes the dividend yield to 6.3%, which only provides a modest boost to overall returns.

Check out our latest analysis for CNOOC

CNOOC's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. The last dividend was quite easily covered by CNOOC's earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 1.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 49% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of CN¥0.444 in 2014 to the most recent total annual payment of CN¥1.15. This means that it has been growing its distributions at 10% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

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. CNOOC has seen EPS rising for the last five years, at 18% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

CNOOC Looks Like A Great Dividend Stock

Overall, we think that CNOOC could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, CNOOC has 2 warning signs (and 1 which is 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.