Alibaba Group Holding's (NYSE:BABA) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Alibaba Group Holding Limited (NYSE:BABA) has announced that it will be paying its dividend of CN¥1.98 on the 10th of July, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 0.9%, which is below the industry average.

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Alibaba Group Holding's Future Dividend Projections Appear Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Alibaba Group Holding's 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.

Looking forward, earnings per share is forecast to rise by 44.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 2.4%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Alibaba Group Holding

Alibaba Group Holding Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2023, the dividend has gone from CN¥7.1 total annually to CN¥7.54. This means that it has been growing its distributions at 3.1% per annum over that time. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

Alibaba Group Holding May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Alibaba Group Holding hasn't seen much change in its earnings per share over the last five years. If Alibaba Group Holding is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Alibaba Group Holding's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 50 Alibaba Group Holding analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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.