COSCO SHIPPING International (Hong Kong)'s (HKG:517) Dividend Will Be Increased To HK$0.10

COSCO SHIPPING International (Hong Kong) Co., Ltd. (HKG:517) has announced that it will be increasing its dividend on the 28th of September to HK$0.10. This will take the dividend yield from 9.4% to 9.4%, providing a nice boost to shareholder returns.

Check out our latest analysis for COSCO SHIPPING International (Hong Kong)

COSCO SHIPPING International (Hong Kong) Doesn't Earn Enough To Cover Its Payments

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Over the next year, EPS could expand by 5.5% if the company continues along the path it has been on recently. However, if the dividend continues growing along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 109% over the next year.

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$0.05 to HK$0.26. This means that it has been growing its distributions at 18% 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 May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that COSCO SHIPPING International (Hong Kong) has grown earnings per share at 5.5% per year over the past five years. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments are bit high to be considered sustainable, and the track record isn't the best. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign 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 performing dividend stock.

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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.
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