Ping An Insurance (Group) Company of China, Ltd. (HKG:2318) will increase its dividend on the 25th of October to HK$1.06. Based on the announced payment, the dividend yield for the company will be 4.5%, which is fairly typical for the industry.
Ping An Insurance (Group) Company of China's Dividend Is Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much. However, Ping An Insurance (Group) Company of China's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 11.7% over the next year. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.
The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The dividend has gone from CN¥0.28 in 2011 to the most recent annual payment of CN¥2.28. This works out to be a compound annual growth rate (CAGR) of approximately 24% a year over that time. Ping An Insurance (Group) Company of China has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see Ping An Insurance (Group) Company of China has been growing its earnings per share at 17% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Ping An Insurance (Group) Company of China's prospects of growing its dividend payments in the future.
Ping An Insurance (Group) Company of China Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Ping An Insurance (Group) Company of China is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
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. For example, we've identified 3 warning signs for Ping An Insurance (Group) Company of China (1 shouldn't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list 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.
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