The board of Beijing Enterprises Urban Resources Group Limited (HKG:3718) has announced that it will pay a dividend of CN¥0.012 per share on the 7th of October. The dividend yield is 5.9% based on this payment, which is a little bit low compared to the other companies in the industry.
View our latest analysis for Beijing Enterprises Urban Resources Group
Beijing Enterprises Urban Resources Group's Dividend Is Well Covered By Earnings
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Beijing Enterprises Urban Resources Group was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Looking forward, earnings per share is forecast to rise by 20.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.
Beijing Enterprises Urban Resources Group's Dividend Has Lacked Consistency
Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The dividend has gone from an annual total of CN¥0.0243 in 2022 to the most recent total annual payment of CN¥0.0273. This implies that the company grew its distributions at a yearly rate of about 6.0% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
Dividend Growth May Be Hard To Achieve
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. It's not great to see that Beijing Enterprises Urban Resources Group's earnings per share has fallen at approximately 2.6% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
Beijing Enterprises Urban Resources Group's Dividend Doesn't Look Sustainable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Beijing Enterprises Urban Resources Group's payments, as there could be some issues with sustaining them into the future. While Beijing Enterprises Urban Resources Group is earning enough to cover the payments, the cash flows are lacking. We don't think Beijing Enterprises Urban Resources Group is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Beijing Enterprises Urban Resources Group (of which 1 makes us a bit uncomfortable!) you should know about. Is Beijing Enterprises Urban Resources Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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