China Sunsine Chemical Holdings (SGX:QES) Is Increasing Its Dividend To CN¥0.03

China Sunsine Chemical Holdings Ltd.'s (SGX:QES) dividend will be increasing from last year's payment of the same period to CN¥0.03 on 22nd of May. This takes the annual payment to 5.7% of the current stock price, which is about average for the industry.

We've discovered 1 warning sign about China Sunsine Chemical Holdings. View them for free.

China Sunsine Chemical Holdings' Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, China Sunsine Chemical Holdings' earnings easily cover the dividend. 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 11.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 6.6% by next year, which is in a pretty sustainable range.

View our latest analysis for China Sunsine Chemical Holdings

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was CN¥0.0223, compared to the most recent full-year payment of CN¥0.162. This means that it has been growing its distributions at 22% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

China Sunsine Chemical Holdings May Find It Hard To Grow The Dividend

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. Earnings has been rising at 2.3% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, China Sunsine Chemical Holdings could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for China Sunsine Chemical Holdings that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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