China Sunsine Chemical Holdings (SGX:QES) Will Pay A Larger Dividend Than Last Year At CN¥0.03

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. Despite this raise, the dividend yield of 5.4% is only a modest boost to shareholder returns.

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China Sunsine Chemical Holdings' Projected Earnings Seem Likely To Cover Future Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, China Sunsine Chemical Holdings' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 11.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 6.6%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for China Sunsine Chemical Holdings

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¥0.0223 in 2015, and the most recent fiscal year payment was CN¥0.166. This means that it has been growing its distributions at 22% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been crawling upwards at 2.3% per year. While growth may be thin on the ground, China Sunsine Chemical Holdings could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for China Sunsine Chemical Holdings that investors should take into consideration. 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.