Yincheng Life Service's (HKG:1922) Shareholders Will Receive A Bigger Dividend Than Last Year

Yincheng Life Service CO., Ltd. (HKG:1922) will increase its dividend on the 18th of July to HK$0.13. This takes the annual payment to 3.6% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Yincheng Life Service

Yincheng Life Service's Earnings Easily Cover the Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, Yincheng Life Service's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 48.0% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

Yincheng Life Service Is Still Building Its Track Record

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. Since 2020, the dividend has gone from CN¥0.035 to CN¥0.10. This implies that the company grew its distributions at a yearly rate of about 72% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Yincheng Life Service has impressed us by growing EPS at 48% per year over the past three years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Yincheng Life Service Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. As an example, we've identified 1 warning sign for Yincheng Life Service that you should be aware of before investing. Is Yincheng Life Service not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.