China Overseas Land & Investment (HKG:688) Is Increasing Its Dividend To CN¥0.45

China Overseas Land & Investment Limited (HKG:688) will increase its dividend from last year's comparable payment on the 12th of July to CN¥0.45. This makes the dividend yield about the same as the industry average at 6.6%.

See our latest analysis for China Overseas Land & Investment

China Overseas Land & Investment's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, China Overseas Land & Investment's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 9.0%. 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

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of CN¥0.307 in 2014 to the most recent total annual payment of CN¥0.739. This implies that the company grew its distributions at a yearly rate of about 9.2% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. China Overseas Land & Investment has seen earnings per share falling at 7.4% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On China Overseas Land & Investment's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think China Overseas Land & Investment 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for China Overseas Land & Investment that investors should take into consideration. Is China Overseas Land & Investment not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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