Luzhou Xinglu Water (Group) (HKG:2281) Has Announced A Dividend Of CN¥0.055

Luzhou Xinglu Water (Group) Co., Ltd.'s (HKG:2281) investors are due to receive a payment of CN¥0.055 per share on 31st of July. This means the annual payment will be 8.1% of the current stock price, which is lower than the industry average.

View our latest analysis for Luzhou Xinglu Water (Group)

Luzhou Xinglu Water (Group)'s Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Luzhou Xinglu Water (Group)'s earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 6.4% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 19%, which is in the range that makes us comfortable with the sustainability of the dividend.

Luzhou Xinglu Water (Group)'s Dividend Has Lacked Consistency

Looking back, Luzhou Xinglu Water (Group)'s dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 6 years was CN¥0.08 in 2018, and the most recent fiscal year payment was CN¥0.05. The dividend has shrunk at around 7.5% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Luzhou Xinglu Water (Group) Could Grow Its Dividend

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. We are encouraged to see that Luzhou Xinglu Water (Group) has grown earnings per share at 6.4% per year over the past five years. Luzhou Xinglu Water (Group) definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Luzhou Xinglu Water (Group)'s Dividend

Overall, we think Luzhou Xinglu Water (Group) is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 3 warning signs for Luzhou Xinglu Water (Group) that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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