Sinopec Limited Enhanced Annual Dividend More Than Three-Fold in Two Years (SNP)

dividend yield        ex-dividend date                     dividend payout ratio                             dividend

After two consecutive years of reduced annual dividends, the China Petroleum & Chemical Corporation — or Sinopec Limited (NYSE: SNP) — restored its annual dividend to above the pre-cut level in 2017.

In 2018, SNP surprised in a big way by increasing the annual distribution by 70% above the already increased level of the prior year. With this huge increase, SNP’s annual dividend has grown more than eight-fold since the company initiated distributions in 2001.

While the dividend growth of the last few years makes this equity appealing, there are a few signals that warrant some caution. Primarily, the company’s dividend payout ratio is currently above 100%. The generally accepted maximum for a sustainable payout ratio is 50%, which puts SNP’s ratio at more than twice this level. Also, interested investors should pay close attention to the price-to-earnings (P/E) ratio, which, at 12.8, is approximately 35% higher than the industry average.

Though these signals are negative, they are not yet at critical levels. So long as an investor keeps a watchful eye out for any additional negative signals, investing money in the company is still a viable option, especially if one wants to cash in on the generous bi-annual dividend payments.

Sinopec has not yet declared an ex-dividend date for its upcoming distribution, but based on its past records, a late August to early September ex-date can be expected. The payout date for the dividend should be sometime in mid-September.

China Petroleum & Chemical Corporation – Sinopec Limited –(NYSE: SNP)

Headquartered in Beijing and founded in 2000, the China Petroleum & Chemical Corporation — also referred to as Sinopec Limited — is an energy and chemical company that engages in oil, gas and chemical operations. In terms of 2017 total revenues, the company’s parent entity — China Petrochemical Corporation, or the Sinopec Group — is the world’s largest oil refining, gas and petrochemical conglomerate, as well as the third-largest company overall according to Fortune Magazine’s Global 500 list. The company operates through five business segments: Exploration and Production, Refining, Marketing and Distribution, Chemicals, and Corporate and Others.

Sinopec’s annual dividend dropped almost 18% in 2015 and then another 34.6% in 2016, resulting in a total decline of more than 46% over a two-year period. However, the company then corrected the trend by increasing the annual payout 90% in 2017, which was 2.5% higher than the total dividend paid in 2014 before the two cuts.

After nearly doubling its annual dividend in 2017, the company raised its forecasted payout for 2018 more than 70% to $6.13 per share, which is equivalent to a 6.5% forward yield. This yield is almost 34% above the Sinopec’s 4.9% average yield over the past five years. Additionally, Sinopec’s current yield outperforms by almost three-fold the 2.33% average yield of the overall Basic Materials sector and is 125% higher than the 2.91% average yield of all the companies in the Independent Oil & Gas industry segment. The company’s current yield is even 16.3% higher than the 5.63% average yield of the segment’s only dividend-paying companies.

Sinopec advanced its total annual dividend nearly 230% over the past two consecutive years, which corresponds to an average annual growth rate of more than 80%. Even with five annual dividend cuts since 2001, the company still enhanced its total annual payout amount more than eight-fold and maintained an average annual growth rate of 12.4% over the past 18 years.

Following a brief downtrend that began in April 2017, the share price declined almost 7% at the onset of the trailing 12-months to a 52-week low of $69.82 on December 7, 2017. However, the trend then reversed and ascended more than 50% towards the 52-week peak of $105.50 on May 14, 2018. Prices have pulled back somewhat in the last few months after peaking in mid-May, and currently trade at $93.55, or 25% higher than it was one year prior and 34% above the 52-week low. The share price and dividend growth combined for total return of 32.4% over the past 12 months. Furthermore, the company achieved a total return of 40% over the past three years and a slightly higher total return of almost 47% over the past five years.

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