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The board of China Sunsine Chemical Holdings Ltd. (SGX:QES) has announced that it will be paying its dividend of CN¥0.03 on the 22nd of May, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 5.5%.
Our free stock report includes 1 warning sign investors should be aware of before investing in China Sunsine Chemical Holdings. Read for free now.
China Sunsine Chemical Holdings' 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. Before making this announcement, China Sunsine Chemical Holdings was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
The next year is set to see EPS grow by 11.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 6.6%, which is in the range that makes us comfortable with the sustainability of the dividend.
See our latest analysis for China Sunsine Chemical Holdings
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of CN¥0.0223 in 2015 to the most recent total annual payment of CN¥0.166. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. 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.
Dividend Growth May Be Hard To Achieve
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been crawling upwards at 2.3% per year. If China Sunsine Chemical Holdings is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.
Our Thoughts On China Sunsine Chemical Holdings' 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. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for China Sunsine Chemical Holdings that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.