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

China Overseas Land & Investment Limited (HKG:688) has announced that it will be increasing its dividend from last year's comparable payment on the 12th of July to CN¥0.45. This takes the annual payment to 5.7% of the current stock price, which is about average for the industry.

View our latest analysis for China Overseas Land & Investment

China Overseas Land & Investment's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, China Overseas Land & Investment was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 10.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend 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 works out to be a compound annual growth rate (CAGR) of approximately 9.2% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. China Overseas Land & Investment might have put its house in order since then, but we remain cautious.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's not great to see that China Overseas Land & Investment's earnings per share has fallen at approximately 7.4% per year over the past 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.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think China Overseas Land & Investment's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. 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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