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. This means that the annual payment will be 7.4% of the current stock price, which is in line with the average for the industry.
C&D International Investment Group's Projected Earnings Seem Likely To Cover Future Distributions
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend was quite easily covered by C&D International Investment Group's earnings. This means that a large portion of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 9.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 61%, which is in the range that makes us comfortable with the sustainability of the dividend.
See our latest analysis for C&D International Investment Group
C&D International Investment Group's Dividend Has Lacked Consistency
It's comforting to see that C&D International Investment Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 8 years was CN¥0.0799 in 2017, and the most recent fiscal year payment was CN¥1.12. This works out to be a compound annual growth rate (CAGR) of approximately 39% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
The Dividend's Growth Prospects Are Limited
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. Although it's important to note that C&D International Investment Group's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. C&D International Investment Group is struggling to find viable investments, so it is returning more to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.
Our Thoughts On C&D International Investment Group's Dividend
Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
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 example, we've picked out 2 warning signs for C&D International Investment Group that investors should know about before committing capital to this stock. Is C&D International Investment Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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