Beijing Urban Construction Design & Development Group Co., Limited (HKG:1599) is reducing its dividend from last year's comparable payment to CN¥0.1893 on the 22nd of August. This means the annual payment is 8.9% of the current stock price, which is above the average for the industry.
View our latest analysis for Beijing Urban Construction Design & Development Group
Beijing Urban Construction Design & Development Group's Payment Has Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Beijing Urban Construction Design & Development Group was paying only paying out a fraction of earnings, but the payment was a massive 289% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
The next year is set to see EPS grow by 16.7%. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.
Beijing Urban Construction Design & Development Group Doesn't Have A Long Payment History
Beijing Urban Construction Design & Development Group's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2015, the dividend has gone from CN¥0.0737 total annually to CN¥0.172. This implies that the company grew its distributions at a yearly rate of about 9.9% over that duration. Beijing Urban Construction Design & Development Group has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.
The Dividend Has Growth Potential
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Beijing Urban Construction Design & Development Group has seen EPS rising for the last five years, at 6.9% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
In Summary
In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Beijing Urban Construction Design & Development Group that you should be aware of before investing. Is Beijing Urban Construction Design & Development Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.