COSCO SHIPPING International (Hong Kong) (HKG:517) Has Announced A Dividend Of HK$0.215

COSCO SHIPPING International (Hong Kong) Co., Ltd. (HKG:517) has announced that it will pay a dividend of HK$0.215 per share on the 25th of June. This will take the dividend yield to an attractive 9.8%, providing a nice boost to shareholder returns.

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COSCO SHIPPING International (Hong Kong)'s Projections Indicate Future Payments May Be Unsustainable

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Over the next year, EPS could expand by 17.5% if the company continues along the path it has been on recently. Assuming the dividend continues along recent trends, we think the payout ratio could reach 96%, which probably can't continue without starting to put some pressure on the balance sheet.

See our latest analysis for COSCO SHIPPING International (Hong Kong)

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was HK$0.065 in 2015, and the most recent fiscal year payment was HK$0.48. This means that it has been growing its distributions at 22% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Could Be Constrained

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. COSCO SHIPPING International (Hong Kong) has seen EPS rising for the last five years, at 18% per annum. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.

COSCO SHIPPING International (Hong Kong)'s Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think COSCO SHIPPING International (Hong Kong) will make a great income stock. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We don't think COSCO SHIPPING International (Hong Kong) is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for COSCO SHIPPING International (Hong Kong) that investors need to be conscious of moving forward. 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.