Tian Chang Group Holdings Ltd. (HKG:2182) is reducing its dividend from last year's comparable payment to HK$0.015 on the 28th of June. This means that the annual payment is 3.0% of the current stock price, which is lower than what the rest of the industry is paying.
See our latest analysis for Tian Chang Group Holdings
Tian Chang Group Holdings' Dividend Is Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive. However, Tian Chang Group Holdings' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, EPS could fall by 21.6% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 42%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Tian Chang Group Holdings' Dividend Has Lacked Consistency
It's comforting to see that Tian Chang Group Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2019, the dividend has gone from HK$0.03 total annually to HK$0.015. This works out to a decline of approximately 50% over that time. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend Has Limited Growth Potential
Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Tian Chang Group Holdings' EPS has fallen by approximately 22% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.
Our Thoughts On Tian Chang Group Holdings' Dividend
Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for Tian Chang Group Holdings (1 is concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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