Shanghai Pioneer Holding (HKG:1345) Has Announced That It Will Be Increasing Its Dividend To CN¥0.024

Shanghai Pioneer Holding Ltd (HKG:1345) will increase its dividend from last year's comparable payment on the 20th of October to CN¥0.024. This makes the dividend yield about the same as the industry average at 3.2%.

Check out our latest analysis for Shanghai Pioneer Holding

Shanghai Pioneer Holding's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Shanghai Pioneer Holding was paying a whopping 372% as a dividend, but this only made up 39% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

EPS is set to fall by 4.5% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 42%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Shanghai Pioneer Holding's Dividend Has Lacked Consistency

Shanghai Pioneer Holding has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2014, the annual payment back then was CN¥0.107, compared to the most recent full-year payment of CN¥0.0602. The dividend has shrunk at around 6.2% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Shanghai Pioneer Holding May Find It Hard To Grow The Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Over the past five years, it looks as though Shanghai Pioneer Holding's EPS has declined at around 4.5% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Shanghai Pioneer Holding's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Shanghai Pioneer Holding will make a great income stock. While Shanghai Pioneer Holding 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Shanghai Pioneer Holding that investors need to be conscious of moving forward. 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.