Shougang Concord Century Holdings Limited (HKG:103) has announced that it will be increasing its dividend on the 9th of July to HK$0.015. This makes the dividend yield 4.8%, which is above the industry average.
Shougang Concord Century Holdings' Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Shougang Concord Century Holdings' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share could rise by 67.4% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 11% by next year, which we think can be pretty sustainable going forward.
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from HK$0.02 in 2011 to the most recent annual payment of HK$0.015. The dividend has shrunk at around 2.8% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend Looks Likely To Grow
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. Shougang Concord Century Holdings has impressed us by growing EPS at 67% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
Shougang Concord Century Holdings Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 3 warning signs for Shougang Concord Century Holdings that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.
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