COSCO SHIPPING Ports Limited (HKG:1199) announced that it would reduce its dividend payable on May 31 to HK$0.17. This means that the annual payout is 5.3% of the current share price, which is lower than what the rest of the industry pays.
See our latest analysis for COSCO SHIPPING Ports
COSCO SHIPPING ports do not earn enough to cover its payments
The dividend yield is a little low, but the sustainability of payouts is also an important part of valuing an income stock. Based on the last payout, COSCO SHIPPING Ports was earning quite comfortably enough to cover the dividend. This indicates that a fairly large proportion of profits are reinvested in the business.
Earnings per share are expected to increase 14.3% over the next year. However, if the dividend continues to grow along recent trends, it could start to put pressure on the balance sheet as the payout ratio becomes very high over the next year.
The company has a long history of dividends, but it doesn’t look good with the cuts of the past. Since 2012, the dividend has increased from US$0.042 to US$0.043. Dividend payouts increased, but very slowly over the period. We are happy to see that the dividend has increased, but with a limited rate of growth and fluctuations in payouts, total shareholder return may be limited.
The dividend should increase
With a relatively unstable dividend, it is even more important to see if earnings per share increase. COSCO SHIPPING Ports has seen EPS increase over the past five years, by 12% per year. The lack of cash flow, however, makes us a little cautious, especially regarding the future of the dividend.
We really like COSCO SHIPPING ports dividend
Overall, we think COSCO SHIPPING Ports could be a great option for a dividend investment, although we would have preferred the dividend not to be cut this year. The cut will allow the company to continue paying the dividend without putting pressure on the balance sheet, meaning it could remain sustainable for longer. Overall, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favor companies with a consistent and stable dividend policy as opposed to those with an irregular one. At the same time, there are other factors that our readers should be aware of before investing capital in a stock. For example, we chose 1 warning sign for COSCO SHIPPING ports that investors should consider. If you are a dividend investor, you can also consult our curated list of high yielding dividend stocks.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.