China Railway Hi-tech Industry (SHSE:600528) Is Paying Out Less In Dividends Than Last Year

China Railway Hi-tech Industry Corporation Limited's (SHSE:600528) dividend is being reduced from last year's payment covering the same period to CN¥0.1013 on the 23rd of August. This payment takes the dividend yield to 1.4%, which only provides a modest boost to overall returns.

Check out our latest analysis for China Railway Hi-tech Industry

China Railway Hi-tech Industry's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, China Railway Hi-tech Industry's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

If the trend of the last few years continues, EPS will grow by 0.7% over the next 12 months. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was CN¥0.10, compared to the most recent full-year payment of CN¥0.1013. Dividend payments have grown at less than 1% a year over this period. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

China Railway Hi-tech Industry May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, China Railway Hi-tech Industry's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

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 China Railway Hi-tech Industry is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for China Railway Hi-tech Industry that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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