Sinofert Holdings (HKG:297) Has Announced That It Will Be Increasing Its Dividend To HK$0.053

Sinofert Holdings Limited (HKG:297) will increase its dividend on the 14th of July to HK$0.053. Even though the dividend went up, the yield is still quite low at only 4.1%.

View our latest analysis for Sinofert Holdings

Sinofert Holdings' Earnings Easily Cover the Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Sinofert Holdings' dividend was only 35% of earnings, however it was paying out 127% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to expand by 50.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was CN¥0.013 in 2012, and the most recent fiscal year payment was CN¥0.043. This means that it has been growing its distributions at 12% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see Sinofert Holdings has been growing its earnings per share at 74% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Sinofert Holdings will make a great income stock. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Sinofert Holdings is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Sinofert Holdings that investors should know about before committing capital to this stock. Is Sinofert Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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