The board of A-Living Smart City Services Co., Ltd. (HKG:3319) has announced that it will pay a dividend of CN¥0.0325 per share on the 22nd of January. This takes the annual payment to 3.0% of the current stock price, which unfortunately is below what the industry is paying.
See our latest analysis for A-Living Smart City Services
Estimates Indicate A-Living Smart City Services' Dividend Coverage Likely To Improve
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. A-Living Smart City Services is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.
Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend extends its recent trend, estimates say the dividend could reach 1.6%, which we would be comfortable to see continuing.
A-Living Smart City Services' Dividend Has Lacked Consistency
Looking back, A-Living Smart City Services' dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2018, the annual payment back then was CN¥0.15, compared to the most recent full-year payment of CN¥0.085. This works out to be a decline of approximately 9.0% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Has Limited Growth Potential
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. A-Living Smart City Services' EPS has fallen by approximately 18% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.
The Dividend Could Prove To Be Unreliable
In summary, while it's always good to see the dividend being raised, we don't think A-Living Smart City Services' payments are rock solid. 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. We would probably look elsewhere for an income investment.
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. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. If you are a dividend investor, you might also want to look at our curated list of high yield 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.