Yahoo Finance NetEase's (NASDAQ:NTES) Upcoming Dividend Will Be Larger Than Last Year's
The board of NetEase, Inc. (NASDAQ:NTES) has announced that it will be paying its dividend of CN¥0.4625 on the 26th of June, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 1.6%, providing a nice boost to shareholder returns.
View our latest analysis for NetEase
NetEase's Earnings Easily Cover The Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, NetEase's dividend was comfortably covered by both cash flow and earnings. 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 19.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 4.2%, which is in the range that makes us comfortable with the sustainability of the dividend.
NetEase's Dividend Has Lacked Consistency
Looking back, NetEase's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2014, the dividend has gone from CN¥1.71 total annually to CN¥9.46. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year 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.
The Dividend Looks Likely To Grow
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. NetEase has impressed us by growing EPS at 25% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
NetEase Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that NetEase is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 35 analysts we track are forecasting for NetEase for free with public analyst estimates for the company. 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.
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