C&D International Investment Group Limited (HKG:1908) is reducing its dividend from last year's comparable payment to CN¥1.20 on the 8th of July. Despite the cut, the dividend yield of 7.4% will still be comparable to other companies in the industry.
C&D International Investment Group's Payment Could Potentially Have Solid Earnings Coverage
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, C&D International Investment Group's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
Over the next year, EPS is forecast to expand by 7.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 63% by next year, which is in a pretty sustainable range.
View our latest analysis for C&D International Investment Group
C&D International Investment Group's Dividend Has Lacked Consistency
C&D International Investment Group has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2017, the annual payment back then was CN¥0.0799, compared to the most recent full-year payment of CN¥1.12. This means that it has been growing its distributions at 39% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
C&D International Investment Group May Find It Hard To Grow The Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. C&D International Investment Group hasn't seen much change in its earnings per share over the last five years. C&D International Investment Group is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.
Our Thoughts On C&D International Investment Group's Dividend
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. While C&D International Investment Group is earning enough to cover the payments, the cash flows are lacking. 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for C&D International Investment Group that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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