Shanghai Commercial & Savings Bank (TWSE:5876) Is Due To Pay A Dividend Of NT$1.80

The board of The Shanghai Commercial & Savings Bank, Ltd. (TWSE:5876) has announced that it will pay a dividend on the 2nd of August, with investors receiving NT$1.80 per share. Based on this payment, the dividend yield on the company's stock will be 3.9%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Shanghai Commercial & Savings Bank

Shanghai Commercial & Savings Bank's Dividend Forecasted To Be Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Shanghai Commercial & Savings Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 59%, which means that Shanghai Commercial & Savings Bank would be able to pay its last dividend without pressure on the balance sheet.

Over the next year, EPS is forecast to expand by 13.3%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 54% by next year, which is in a pretty sustainable range.

Shanghai Commercial & Savings Bank Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from NT$1.37 total annually to NT$1.80. This works out to be a compound annual growth rate (CAGR) of approximately 2.8% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. It's not great to see that Shanghai Commercial & Savings Bank's earnings per share has fallen at approximately 2.9% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Now, if you want to look closer, it would be worth checking out our free research on Shanghai Commercial & Savings Bank management tenure, salary, and performance. Is Shanghai Commercial & Savings Bank 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.

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