China Airlines' (TWSE:2610) Dividend Will Be Increased To NT$0.6902

China Airlines, Ltd. (TWSE:2610) will increase its dividend from last year's comparable payment on the 21st of August to NT$0.6902. This makes the dividend yield about the same as the industry average at 2.9%.

See our latest analysis for China Airlines

China Airlines' Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by China Airlines' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

EPS is set to fall by 39.6% over the next 12 months. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 88%, meaning that most of the company's earnings are being paid out to shareholders.

China Airlines' Dividend Has Lacked Consistency

It's comforting to see that China Airlines has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2016, the annual payment back then was NT$0.459, compared to the most recent full-year payment of NT$0.69. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that China Airlines has been growing its earnings per share at 40% a year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that China Airlines could prove to be a strong dividend payer.

China Airlines Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that China Airlines is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Just as an example, we've come across 3 warning signs for China Airlines you should be aware of, and 1 of them shouldn't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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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