SinoMedia Holding's (HKG:623) Dividend Will Be Increased To CN¥0.162

SinoMedia Holding Limited (HKG:623) has announced that it will be increasing its dividend from last year's comparable payment on the 12th of July to CN¥0.162. This makes the dividend yield 8.6%, which is above the industry average.

View our latest analysis for SinoMedia Holding

SinoMedia Holding's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, SinoMedia Holding's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share could rise by 5.3% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 65% by next year, which is in a pretty sustainable range.

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 CN¥0.26 in 2014, and the most recent fiscal year payment was CN¥0.0835. Dividend payments have fallen sharply, down 68% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

We Could See SinoMedia Holding's Dividend Growing

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. We are encouraged to see that SinoMedia Holding has grown earnings per share at 5.3% per year over the past five years. SinoMedia Holding definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 3 warning signs for SinoMedia Holding that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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