Postal Savings Bank of China's (HKG:1658) Dividend Will Be CN¥0.1356

Postal Savings Bank of China Co., Ltd.'s (HKG:1658) investors are due to receive a payment of CN¥0.1356 per share on 13th of February. This means that the annual payment is 4.9% of the current stock price, which is lower than what the rest of the industry is paying.

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Postal Savings Bank of China's Dividend Forecasted To Be 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.

Postal Savings Bank of China has a good history of paying out dividends, with its current track record at 9 years. Past distributions do not necessarily guarantee future ones, but Postal Savings Bank of China's payout ratio of 31% is a good sign for current shareholders as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to fall by 3.8% over the next 3 years. Despite that, analysts estimate the future payout ratio could be 32% over the same time period, which is in a pretty comfortable range.

View our latest analysis for Postal Savings Bank of China

Postal Savings Bank of China's Dividend Has Lacked Consistency

Postal Savings Bank of China has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of CN¥0.0737 in 2016 to the most recent total annual payment of CN¥0.237. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Postal Savings Bank of China has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Postal Savings Bank of China May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Although it's important to note that Postal Savings Bank of China's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. If Postal Savings Bank of China is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

An additional note is that the company has been raising capital by issuing stock equal to 21% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

In Summary

Overall, we think that Postal Savings Bank of China could make a reasonable income stock, even though it did cut the dividend this year. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. 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. For example, we've picked out 2 warning signs for Postal Savings Bank of China that investors should know about before committing capital to this stock. 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.