The board of Tenfu (Cayman) Holdings Company Limited (HKG:6868) has announced that it will pay a dividend of CN¥0.08 per share on the 28th of May. This means that the annual payment is 3.1% of the current stock price, which is lower than what the rest of the industry is paying.
Estimates Indicate Tenfu (Cayman) Holdings' Could Struggle to Maintain Dividend Payments In The Future
If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Tenfu (Cayman) Holdings' dividend made up quite a large proportion of earnings but only 53% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.
Looking forward, EPS could fall by 11.5% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 100%, which could put the dividend under pressure if earnings don't start to improve.
Check out our latest analysis for Tenfu (Cayman) Holdings
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was CN¥0.166, compared to the most recent full-year payment of CN¥0.097. This works out to be a decline of approximately 5.2% 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.
Dividend Growth Potential Is Shaky
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Earnings per share has been sinking by 12% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.
Our Thoughts On Tenfu (Cayman) Holdings' 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. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Tenfu (Cayman) Holdings (of which 1 is a bit concerning!) you should know about. 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.