Jiangsu Expressway (HKG:177) Is Increasing Its Dividend To CN¥0.5367

The board of Jiangsu Expressway Company Limited (HKG:177) has announced that it will be paying its dividend of CN¥0.5367 on the 30th of July, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 4.8%, which is below the industry average.

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Jiangsu Expressway's Future Dividend Projections Appear Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Jiangsu Expressway's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 12.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 50%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Jiangsu Expressway

Jiangsu Expressway Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of CN¥0.38 in 2015 to the most recent total annual payment of CN¥0.49. This works out to be a compound annual growth rate (CAGR) of approximately 2.6% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

We Could See Jiangsu Expressway's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. Jiangsu Expressway has impressed us by growing EPS at 9.4% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Jiangsu Expressway's Dividend

Overall, we always like to see the dividend being raised, but we don't think Jiangsu Expressway will make a great income stock. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Jiangsu Expressway (of which 1 is potentially serious!) 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.