PICC Property and Casualty (HKG:2328) Is Increasing Its Dividend To CN¥0.5359

The board of PICC Property and Casualty Company Limited (HKG:2328) has announced that it will be paying its dividend of CN¥0.5359 on the 9th of August, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 5.3%, which is in line with the average for the industry.

View our latest analysis for PICC Property and Casualty

PICC Property and Casualty's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend was quite easily covered by PICC Property and Casualty'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 39.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from CN¥0.162 total annually to CN¥0.489. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year 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.

PICC Property and Casualty Could Grow Its Dividend

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. PICC Property and Casualty has impressed us by growing EPS at 9.7% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like PICC Property and Casualty's Dividend

Overall, a dividend increase is always good, and we think that PICC Property and Casualty is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 PICC Property and Casualty that investors need to be conscious of moving forward. Is PICC Property and Casualty not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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