Acter Technology Integration Group (SHSE:603163) Has Announced That Its Dividend Will Be Reduced To CN¥0.80

Acter Technology Integration Group Co., Ltd. (SHSE:603163) is reducing its dividend from last year's comparable payment to CN¥0.80 on the 14th of June. Despite the cut, the dividend yield of 2.8% will still be comparable to other companies in the industry.

View our latest analysis for Acter Technology Integration Group

Acter Technology Integration Group's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Acter Technology Integration Group was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Over the next year, EPS is forecast to expand by 100.3%. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

Acter Technology Integration Group Is Still Building Its Track Record

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Acter Technology Integration Group May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings per share has been crawling upwards at 3.4% per year. Acter Technology Integration Group is struggling to find viable investments, so it is returning more to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On Acter Technology Integration 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. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Acter Technology Integration Group has been making. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 Acter Technology Integration Group that investors should take into consideration. Is Acter Technology Integration Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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