Shenzhen International Holdings (HKG:152) Will Pay A Larger Dividend Than Last Year At HK$0.40

Shenzhen International Holdings Limited (HKG:152) will increase its dividend from last year's comparable payment on the 20th of June to HK$0.40. Based on this payment, the dividend yield for the company will be 6.8%, which is fairly typical for the industry.

Check out our latest analysis for Shenzhen International Holdings

Shenzhen International Holdings' Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend was quite easily covered by Shenzhen International Holdings' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 97.0%. If the dividend continues on this path, the payout ratio could be 24% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of HK$0.374 in 2014 to the most recent total annual payment of HK$0.40. Dividend payments have grown at less than 1% a year over this period. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Shenzhen International Holdings' earnings per share has shrunk at 17% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Shenzhen International Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Shenzhen International Holdings' payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Shenzhen International Holdings (1 is potentially serious!) that you should be aware of before investing. Is Shenzhen International 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.