Yongmao Holdings (SGX:BKX) Is Due To Pay A Dividend Of CN¥0.01

Yongmao Holdings Limited (SGX:BKX) has announced that it will pay a dividend of CN¥0.01 per share on the 5th of September. This payment means the dividend yield will be 1.4%, which is below the average for the industry.

See our latest analysis for Yongmao Holdings

Yongmao Holdings' Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Yongmao Holdings was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 14.5% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 1.3%, which is in the range that makes us comfortable with the sustainability of the dividend.

Yongmao Holdings' Dividend Has Lacked Consistency

Yongmao Holdings has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2013, the annual payment back then was CN¥0.0593, compared to the most recent full-year payment of CN¥0.0479. This works out to be a decline of approximately 2.4% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Yongmao Holdings has seen EPS rising for the last five years, at 14% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Yongmao Holdings Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Yongmao Holdings you should be aware of, and 1 of them shouldn't be ignored. Is Yongmao Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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