Excellence Commercial Property & Facilities Management Group Limited's (HKG:6989) dividend is being reduced from last year's payment covering the same period to CN¥0.0628 on the 11th of July. The dividend yield of 9.9% is still a nice boost to shareholder returns, despite the cut.
Excellence Commercial Property & Facilities Management Group's Projected Earnings Seem Likely To Cover Future Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Excellence Commercial Property & Facilities Management Group's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
Looking forward, earnings per share could rise by 5.2% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 46%, which is in the range that makes us comfortable with the sustainability of the dividend.
See our latest analysis for Excellence Commercial Property & Facilities Management Group
Excellence Commercial Property & Facilities Management 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 annual payment during the last 4 years was CN¥0.0784 in 2021, and the most recent fiscal year payment was CN¥0.128. This means that it has been growing its distributions at 13% per annum over that time. Excellence Commercial Property & Facilities Management Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
Excellence Commercial Property & Facilities Management Group Could Grow Its Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Excellence Commercial Property & Facilities Management Group has seen EPS rising for the last five years, at 5.2% per annum. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.
Our Thoughts On Excellence Commercial Property & Facilities Management 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 the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Excellence Commercial Property & Facilities Management Group you should be aware of, and 1 of them is a bit concerning. Is Excellence Commercial Property & Facilities Management Group 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.