COSCO SHIPPING Ports (HKG:1199) Will Pay A Smaller Dividend Than Last Year

COSCO SHIPPING Ports Limited (HKG:1199) has announced that on 23rd of November, it will be paying a dividend of$0.136, which a reduction from last year's comparable dividend. Despite the cut, the dividend yield of 5.9% will still be comparable to other companies in the industry.

View our latest analysis for COSCO SHIPPING Ports

COSCO SHIPPING Ports Is Paying Out More Than It Is Earning

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, COSCO SHIPPING Ports was paying only paying out a fraction of earnings, but the payment was a massive 99% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

The next 12 months is set to see EPS grow by 28.3%. 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

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the dividend has gone from $0.0264 total annually to $0.0361. This implies that the company grew its distributions at a yearly rate of about 3.2% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend's Growth Prospects Are Limited

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. COSCO SHIPPING Ports has seen earnings per share falling at 4.0% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

COSCO SHIPPING Ports' Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

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 2 warning signs for COSCO SHIPPING Ports that you should be aware of before investing. 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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