Kunlun Energy's (HKG:135) Dividend Is Being Reduced To CN¥0.1609

Kunlun Energy Company Limited's (HKG:135) dividend is being reduced from last year's payment covering the same period to CN¥0.1609 on the 18th of July. Based on this payment, the dividend yield will be 4.3%, which is lower than the average for the industry.

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Kunlun Energy's Payment Could Potentially Have 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. Prior to this announcement, Kunlun Energy's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 26.2% over the next year. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Kunlun Energy

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. The dividend has gone from an annual total of CN¥0.16 in 2015 to the most recent total annual payment of CN¥0.303. This means that it has been growing its distributions at 6.6% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Kunlun Energy might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Kunlun Energy has been growing its earnings per share at 19% a year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

We Really Like Kunlun Energy's Dividend

Overall, we think that Kunlun Energy could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Kunlun Energy that you should be aware of before investing. Is Kunlun Energy not quite the opportunity you were looking for? Why not check out our selection of top 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.