Tenfu (Cayman) Holdings Company Limited's (HKG:6868) dividend is being reduced from last year's payment covering the same period to CN¥0.03 on the 30th of September. This means that the annual payment is 4.1% of the current stock price, which is lower than what the rest of the industry is paying.
See our latest analysis for Tenfu (Cayman) Holdings
Tenfu (Cayman) Holdings Doesn't Earn Enough To Cover Its Payments
If it is predictable over a long period, even low dividend yields can be attractive. The last dividend was quite easily covered by Tenfu (Cayman) Holdings' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
If the company can't turn things around, EPS could fall by 5.2% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 97%, which could put the dividend under pressure if earnings don't start to improve.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. There hasn't been much of a change in the dividend over the last 10 years. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
Dividend Growth May Be Hard To Come By
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Tenfu (Cayman) Holdings' EPS has declined at around 5.2% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
In Summary
Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Tenfu (Cayman) Holdings (of which 1 is a bit unpleasant!) you should know about. Is Tenfu (Cayman) Holdings 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.