NetEase's (NASDAQ:NTES) Upcoming Dividend Will Be Larger Than Last Year's

NetEase, Inc.'s (NASDAQ:NTES) dividend will be increasing from last year's payment of the same period to CN¥0.4325 on 16th of December. This takes the dividend yield to 1.5%, which shareholders will be pleased with.

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NetEase's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, NetEase's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 15.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 4.4%, which is in the range that makes us comfortable with the sustainability of the dividend.

NetEase's Dividend Has Lacked Consistency

It's comforting to see that NetEase 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 2013, the dividend has gone from CN¥1.71 total annually to CN¥7.38. This means that it has been growing its distributions at 18% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. NetEase has impressed us by growing EPS at 12% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for NetEase's prospects of growing its dividend payments in the future.

NetEase Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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. 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 NetEase that investors should take into consideration. 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.