GDH Guangnan (Holdings) (HKG:1203) Is Paying Out A Larger Dividend Than Last Year

GDH Guangnan (Holdings) Limited (HKG:1203) has announced that it will be increasing its periodic dividend on the 18th of July to HK$0.025, which will be 25% higher than last year's comparable payment amount of HK$0.02. This takes the dividend yield to 5.6%, which shareholders will be pleased with.

Our free stock report includes 2 warning signs investors should be aware of before investing in GDH Guangnan (Holdings). Read for free now.

GDH Guangnan (Holdings)'s Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, GDH Guangnan (Holdings)'s dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 21.0% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 18%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for GDH Guangnan (Holdings)

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was HK$0.04 in 2015, and the most recent fiscal year payment was HK$0.035. The dividend has shrunk at around 1.3% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. GDH Guangnan (Holdings) has impressed us by growing EPS at 21% 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.

We Really Like GDH Guangnan (Holdings)'s Dividend

Overall, a dividend increase is always good, and we think that GDH Guangnan (Holdings) is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for GDH Guangnan (Holdings) that you should be aware of before investing. Is GDH Guangnan (Holdings) not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.