YTO Express (International) Holdings' (HKG:6123) Shareholders Will Receive A Bigger Dividend Than Last Year

YTO Express (International) Holdings Limited (HKG:6123) will increase its dividend on the 8th of July to HK$0.065. Even though the dividend went up, the yield is still quite low at only 2.9%.

Check out our latest analysis for YTO Express (International) Holdings

YTO Express (International) Holdings' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, YTO Express (International) Holdings was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 122.4% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 5.4% by next year, which is in a pretty sustainable range.

YTO Express (International) Holdings' Dividend Has Lacked Consistency

Looking back, YTO Express (International) Holdings' dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2015, the dividend has gone from HK$0.016 to HK$0.065. This means that it has been growing its distributions at 22% per annum over that time. YTO Express (International) Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see YTO Express (International) Holdings has been growing its earnings per share at 122% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

YTO Express (International) Holdings Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that YTO Express (International) Holdings is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for YTO Express (International) Holdings you should be aware of, and 1 of them is concerning. Is YTO Express (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.