Bank of GuiyangLtd's (SHSE:601997) Dividend Is Being Reduced To CN¥0.29

Bank of Guiyang Co.,Ltd. (SHSE:601997) has announced that on 12th of June, it will be paying a dividend ofCN¥0.29, which a reduction from last year's comparable dividend. The dividend yield will be in the average range for the industry at 5.1%.

See our latest analysis for Bank of GuiyangLtd

Bank of GuiyangLtd's Dividend Forecasted To Be Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Having paid out dividends for 7 years, Bank of GuiyangLtd has a good history of paying out a part of its earnings to shareholders. While past data isn't a guarantee for the future, Bank of GuiyangLtd's latest earnings report puts its payout ratio at 20%, showing that the company can pay out its dividends comfortably.

EPS is set to fall by 3.2% over the next 12 months. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 22%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

Bank of GuiyangLtd Doesn't Have A Long Payment History

It is great to see that Bank of GuiyangLtd has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of CN¥0.186 in 2017 to the most recent total annual payment of CN¥0.29. This means that it has been growing its distributions at 6.6% per annum over that time. Bank of GuiyangLtd has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Bank of GuiyangLtd has seen earnings per share falling at 2.7% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Bank of GuiyangLtd's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. Overall, we don't think this company has the makings of a good income stock.

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 Bank of GuiyangLtd (of which 1 is potentially serious!) you should know about. Is Bank of GuiyangLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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