Sichuan Energy Investment Development's (HKG:1713) Shareholders Will Receive A Bigger Dividend Than Last Year

Sichuan Energy Investment Development Co., Ltd. (HKG:1713) will increase its dividend from last year's comparable payment on the 25th of July to CN¥0.1433. This will take the annual payment to 8.0% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Sichuan Energy Investment Development

Sichuan Energy Investment Development's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Sichuan Energy Investment Development's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

If the trend of the last few years continues, EPS will grow by 8.5% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

Sichuan Energy Investment Development's Dividend Has Lacked Consistency

Looking back, Sichuan Energy Investment Development's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 5 years was CN¥0.085 in 2019, and the most recent fiscal year payment was CN¥0.13. This implies that the company grew its distributions at a yearly rate of about 8.9% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

We Could See Sichuan Energy Investment Development's Dividend Growing

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. It's encouraging to see that Sichuan Energy Investment Development has been growing its earnings per share at 8.5% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

We Really Like Sichuan Energy Investment Development's Dividend

Overall, a dividend increase is always good, and we think that Sichuan Energy Investment Development is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Sichuan Energy Investment Development that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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