China Mobile (HKG:941) Will Pay A Dividend Of CN¥2.40

China Mobile Limited (HKG:941) will pay a dividend of CN¥2.40 on the 26th of June. This will take the dividend yield to an attractive 6.8%, providing a nice boost to shareholder returns.

View our latest analysis for China Mobile

China Mobile's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, China Mobile's was paying out quite a large proportion of earnings and 89% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

Over the next year, EPS is forecast to expand by 20.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 69% by next year, which is in a pretty sustainable range.

China Mobile Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was CN¥2.71, compared to the most recent full-year payment of CN¥4.45. This implies that the company grew its distributions at a yearly rate of about 5.1% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

We Could See China Mobile's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. China Mobile has impressed us by growing EPS at 5.7% per year over the past three years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Our Thoughts On China Mobile's Dividend

In summary, while it's always good to see the dividend being raised, we don't think China Mobile's payments are rock solid. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think China Mobile is a great stock to add to your portfolio if income is your focus.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 18 China Mobile analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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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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.