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Maanshan Iron & Steel (HKG:323) Will Pay A Larger Dividend Than Last Year At HK$0.16
Maanshan Iron & Steel Company Limited's (HKG:323) dividend will be increasing to HK$0.16 on 29th of July. This will take the annual payment from 4.6% to 4.6% of the stock price, which is above what most companies in the industry pay.
Check out our latest analysis for Maanshan Iron & Steel
Maanshan Iron & Steel's Earnings Easily Cover the Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Maanshan Iron & Steel was paying only paying out a fraction of earnings, but the payment was a massive 129% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.
Over the next year, EPS is forecast to expand by 47.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 20% 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. Since 2011, the first annual payment was CN¥0.05, compared to the most recent full-year payment of CN¥0.13. This means that it has been growing its distributions at 10% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
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. We are encouraged to see that Maanshan Iron & Steel has grown earnings per share at 20% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
Our Thoughts On Maanshan Iron & Steel's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Maanshan Iron & Steel is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
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 3 warning signs for Maanshan Iron & Steel that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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About SEHK:323
Maanshan Iron & Steel
Manufactures and sells iron and steel products, and related by-products in Mainland China, Hong Kong, and internationally.
Fair value with moderate growth potential.