Zhejiang Construction Investment GroupLtd's (SZSE:002761) Dividend Is Being Reduced To CN¥0.05

Zhejiang Construction Investment Group Co.,Ltd (SZSE:002761) has announced that on 9th of August, it will be paying a dividend ofCN¥0.05, which a reduction from last year's comparable dividend. This means that the annual payment is 0.6% of the current stock price, which is lower than what the rest of the industry is paying.

See our latest analysis for Zhejiang Construction Investment GroupLtd

Zhejiang Construction Investment GroupLtd's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, Zhejiang Construction Investment GroupLtd's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Unless the company can turn things around, EPS could fall by 23.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 24%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Zhejiang Construction Investment GroupLtd's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The annual payment during the last 4 years was CN¥0.20 in 2020, and the most recent fiscal year payment was CN¥0.05. The dividend has fallen 75% over that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Zhejiang Construction Investment GroupLtd's EPS has fallen by approximately 23% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On Zhejiang Construction Investment GroupLtd'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 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. This company is not in the top tier of income providing stocks.

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. Case in point: We've spotted 4 warning signs for Zhejiang Construction Investment GroupLtd (of which 2 are potentially serious!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.

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