Yuexiu Services Group (HKG:6626) Is Increasing Its Dividend To CN¥0.10

Yuexiu Services Group Limited (HKG:6626) will increase its dividend from last year's comparable payment on the 20th of September to CN¥0.10. The payment will take the dividend yield to 5.8%, which is in line with the average for the industry.

View our latest analysis for Yuexiu Services Group

Yuexiu Services Group's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Yuexiu Services Group's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 56.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

Yuexiu Services Group Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of CN¥0.0824 in 2022 to the most recent total annual payment of CN¥0.159. This works out to be a compound annual growth rate (CAGR) of approximately 39% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Yuexiu Services Group has grown earnings per share at 48% per year over the past five years. Yuexiu Services Group is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We Really Like Yuexiu Services Group's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 Yuexiu Services Group that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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