Tingyi (Cayman Islands) Holding (HKG:322) Has Announced That It Will Be Increasing Its Dividend To CN¥0.5953

The board of Tingyi (Cayman Islands) Holding Corp. (HKG:322) has announced that it will be paying its dividend of CN¥0.5953 on the 10th of July, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 6.1%, which is in line with the average for the industry.

See our latest analysis for Tingyi (Cayman Islands) Holding

Tingyi (Cayman Islands) Holding's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last dividend, Tingyi (Cayman Islands) Holding is earning enough to cover the payment, but then it makes up 160% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

EPS is set to grow by 34.3% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 85% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of CN¥0.223 in 2014 to the most recent total annual payment of CN¥0.553. This works out to be a compound annual growth rate (CAGR) of approximately 9.5% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Tingyi (Cayman Islands) Holding might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

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. Earnings per share has been crawling upwards at 4.8% per year. Tingyi (Cayman Islands) Holding is struggling to find viable investments, so it is returning more to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Tingyi (Cayman Islands) Holding that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.