COSCO SHIPPING International (Hong Kong)'s (HKG:517) Shareholders Will Receive A Bigger Dividend Than Last Year

COSCO SHIPPING International (Hong Kong) Co., Ltd. (HKG:517) has announced that it will be increasing its dividend from last year's comparable payment on the 28th of September to HK$0.11. This makes the dividend yield about the same as the industry average at 8.8%.

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

COSCO SHIPPING International (Hong Kong) Is Paying Out More Than It Is Earning

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

EPS is set to fall by 0.2% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 113%, which could put the dividend in jeopardy if the company's earnings don't improve.

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. The dividend has gone from an annual total of HK$0.05 in 2012 to the most recent total annual payment of HK$0.20. This means that it has been growing its distributions at 15% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

COSCO SHIPPING International (Hong Kong) May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Although it's important to note that COSCO SHIPPING International (Hong Kong)'s earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

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

In conclusion, we have some concerns about this dividend, even though it being raised is good. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

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. 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.