China Sunsine Chemical Holdings' (SGX:QES) Upcoming Dividend Will Be Larger Than Last Year's

China Sunsine Chemical Holdings Ltd.'s (SGX:QES) dividend will be increasing from last year's payment of the same period to CN¥0.03 on 22nd of May. Although the dividend is now higher, the yield is only 5.5%, which is below the industry average.

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China Sunsine Chemical Holdings' Future Dividend Projections Appear Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, China Sunsine Chemical Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 10.9%. If the dividend continues on this path, the payout ratio could be 6.6% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for China Sunsine Chemical Holdings

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was CN¥0.0229 in 2015, and the most recent fiscal year payment was CN¥0.162. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. China Sunsine Chemical Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

China Sunsine Chemical Holdings May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings per share has been crawling upwards at 2.3% per year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Our Thoughts On China Sunsine Chemical Holdings' Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for China Sunsine Chemical Holdings that you should be aware of before investing. Is China Sunsine Chemical Holdings 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.