COSCO SHIPPING Ports' (HKG:1199) Upcoming Dividend Will Be Larger Than Last Year's

COSCO SHIPPING Ports Limited (HKG:1199) has announced that it will be increasing its dividend from last year's comparable payment on the 19th of June to $0.155. This makes the dividend yield about the same as the industry average at 6.8%.

Check out our latest analysis for COSCO SHIPPING Ports

COSCO SHIPPING Ports Doesn't Earn Enough To Cover Its Payments

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. The last dividend was quite easily covered by COSCO SHIPPING Ports' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 24.7%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.

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 $0.05 in 2014 to the most recent total annual payment of $0.0373. The dividend has shrunk at around 2.9% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

COSCO SHIPPING Ports May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, COSCO SHIPPING Ports' earnings per share has shrunk at approximately 3.0% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, COSCO SHIPPING Ports has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about. 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.