Anhui Expressway (HKG:995) Is Increasing Its Dividend To CN¥0.6607

The board of Anhui Expressway Company Limited (HKG:995) has announced that it will be paying its dividend of CN¥0.6607 on the 12th of July, an increased payment from last year's comparable dividend. This takes the annual payment to 6.8% of the current stock price, which is about average for the industry.

View our latest analysis for Anhui Expressway

Anhui Expressway's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Anhui Expressway was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

If the trend of the last few years continues, EPS will grow by 7.7% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 68% by next year, which is in a pretty sustainable range.

Anhui Expressway Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was CN¥0.22, compared to the most recent full-year payment of CN¥0.601. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

We Could See Anhui Expressway's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Anhui Expressway has seen EPS rising for the last five years, at 7.7% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Anhui Expressway will make a great income stock. While Anhui Expressway is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

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. As an example, we've identified 1 warning sign for Anhui Expressway that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.