Kunlun Energy's (HKG:135) Shareholders Will Receive A Smaller Dividend Than Last Year

Kunlun Energy Company Limited (HKG:135) is reducing its dividend from last year's comparable payment to CN¥0.1609 on the 18th of July. This means that the dividend yield is 4.1%, which is a bit low when comparing to other companies in the industry.

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Kunlun Energy's Payment Could Potentially Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Kunlun Energy's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 31.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 41% by next year, which is in a pretty sustainable range.

View our latest analysis for Kunlun Energy

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was CN¥0.16 in 2015, and the most recent fiscal year payment was CN¥0.303. This implies that the company grew its distributions at a yearly rate of about 6.6% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Kunlun Energy might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Kunlun Energy has impressed us by growing EPS at 19% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like Kunlun Energy's Dividend

Overall, we think that Kunlun Energy could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Kunlun Energy that investors should take into consideration. 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.