Kunlun Energy (HKG:135) Is Increasing Its Dividend To CN¥0.3048

The board of Kunlun Energy Company Limited (HKG:135) has announced that it will be paying its dividend of CN¥0.3048 on the 18th of July, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 4.0%, which is below the industry average.

Check out our latest analysis for Kunlun Energy

Kunlun Energy's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. The last dividend was quite easily covered by Kunlun Energy's earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 28.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of CN¥0.181 in 2014 to the most recent total annual payment of CN¥0.284. This means that it has been growing its distributions at 4.6% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings have grown at around 2.7% a year for the past five years, which isn't massive but still better than seeing them shrink. The company has been growing at a pretty soft 2.7% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Kunlun Energy's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Kunlun Energy that investors need to be conscious of moving forward. Is Kunlun Energy 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.