Zhongsheng Group Holdings (HKG:881) Will Pay A Larger Dividend Than Last Year At CN¥1.09

Zhongsheng Group Holdings Limited (HKG:881) has announced that it will be increasing its dividend from last year's comparable payment on the 14th of July to CN¥1.09. Although the dividend is now higher, the yield is only 3.0%, which is below the industry average.

Check out our latest analysis for Zhongsheng Group Holdings

Zhongsheng Group Holdings' Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Zhongsheng Group Holdings 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.

Over the next year, EPS is forecast to expand by 55.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 32% 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. Since 2013, the dividend has gone from CN¥0.08 total annually to CN¥0.97. This means that it has been growing its distributions at 28% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Zhongsheng Group Holdings has seen EPS rising for the last five years, at 13% per annum. Zhongsheng Group Holdings definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Zhongsheng Group Holdings Looks Like A Great Dividend Stock

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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Zhongsheng Group Holdings that you should be aware of before investing. Is Zhongsheng Group Holdings 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.