China Merchants Port Holdings (HKG:144) Will Pay A Larger Dividend Than Last Year At HK$0.22

China Merchants Port Holdings Company Limited (HKG:144) will increase its dividend on the 18th of November to HK$0.22, which is 22% higher than last year. This makes the dividend yield about the same as the industry average at 5.4%.

View our latest analysis for China Merchants Port Holdings

China Merchants Port Holdings' Earnings Easily Cover the Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, China Merchants Port Holdings was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 11.6% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 35%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2011, the dividend has gone from HK$1.03 to HK$0.69. The dividend has shrunk at around 3.9% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. China Merchants Port Holdings has seen EPS rising for the last five years, at 14% per annum. China Merchants Port Holdings definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

China Merchants Port Holdings 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. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 4 warning signs for China Merchants Port Holdings you should be aware of, and 1 of them is a bit unpleasant. We have also put together a list of global stocks with a solid dividend.

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