GDH Guangnan (Holdings)'s (HKG:1203) Shareholders Will Receive A Bigger 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 will take the annual payment to 5.4% of the stock price, which is above what most companies in the industry pay.

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GDH Guangnan (Holdings)'s Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, based ont he last payment, GDH Guangnan (Holdings) was earning enough to cover the dividend pretty comfortably. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

Over the next year, EPS is forecast to expand by 62.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 13% by next year, which is in a pretty sustainable range.

Check out our latest analysis for GDH Guangnan (Holdings)

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. 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. Doing the maths, this is a decline of about 1.3% per year. 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. We are encouraged to see that GDH Guangnan (Holdings) has grown earnings per share 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.

Our Thoughts On GDH Guangnan (Holdings)'s Dividend

In summary, while it's always good to see the dividend being raised, we don't think GDH Guangnan (Holdings)'s payments are rock solid. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. 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.

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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.