Shanghai Pioneer Holding (HKG:1345) Is Increasing Its Dividend To CN¥0.024

Shanghai Pioneer Holding Ltd's (HKG:1345) dividend will be increasing from last year's payment of the same period to CN¥0.024 on 20th of October. The payment will take the dividend yield to 3.1%, which is in line with the average for the industry.

Check out our latest analysis for Shanghai Pioneer Holding

Shanghai Pioneer Holding's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Shanghai Pioneer Holding's dividend was only 39% of earnings, however it was paying out 372% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Unless the company can turn things around, EPS could fall by 4.5% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 42%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Shanghai Pioneer Holding's Dividend Has Lacked Consistency

Looking back, Shanghai Pioneer Holding's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of CN¥0.107 in 2014 to the most recent total annual payment of CN¥0.0577. This works out to be a decline of approximately 6.6% per year over that time. 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

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. In the last five years, Shanghai Pioneer Holding's earnings per share has shrunk at approximately 4.5% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

The Dividend Could Prove To Be Unreliable

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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Shanghai Pioneer 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.