China Taiping Insurance Holdings (HKG:966) Is Increasing Its Dividend To HK$0.30

China Taiping Insurance Holdings Company Limited's (HKG:966) dividend will be increasing from last year's payment of the same period to HK$0.30 on 23rd of July. This takes the annual payment to 4.4% of the current stock price, which is about average for the industry.

View our latest analysis for China Taiping Insurance Holdings

China Taiping Insurance Holdings' 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. However, prior to this announcement, China Taiping Insurance Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 59.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 15% by next year, which is in a pretty sustainable range.

China Taiping Insurance Holdings' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2017, the annual payment back then was HK$0.10, compared to the most recent full-year payment of HK$0.30. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. China Taiping Insurance Holdings 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.

China Taiping Insurance Holdings May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, China Taiping Insurance Holdings' earnings per share has shrunk at approximately 4.1% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On China Taiping Insurance Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think China Taiping Insurance Holdings' payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think China Taiping Insurance Holdings is a great stock to add to your portfolio if income is your focus.

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. For instance, we've picked out 1 warning sign for China Taiping Insurance Holdings 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.