Yahoo Finance Churchill China (LON:CHH) Is Increasing Its Dividend To £0.25
Churchill China plc (LON:CHH) will increase its dividend from last year's comparable payment on the 17th of June to £0.25. Despite this raise, the dividend yield of 3.1% is only a modest boost to shareholder returns.
Check out our latest analysis for Churchill China
Churchill China's Payment Has Solid Earnings Coverage
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last dividend, Churchill China is earning enough to cover the payment, but then it makes up 129% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
Over the next year, EPS is forecast to expand by 22.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 44%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was £0.146 in 2014, and the most recent fiscal year payment was £0.36. This works out to be a compound annual growth rate (CAGR) of approximately 9.4% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
Churchill 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. However, Churchill China's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Growth of 1.3% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.
Our Thoughts On Churchill China's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Churchill China is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 1 warning sign for Churchill China that investors should know about before committing capital to this stock. 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.
