Tianjin LVYIN Landscape and Ecology Construction's (SZSE:002887) Shareholders Will Receive A Smaller Dividend Than Last Year

Tianjin LVYIN Landscape and Ecology Construction Co., Ltd (SZSE:002887) is reducing its dividend from last year's comparable payment to CN¥0.25 on the 31st of May. This means that the annual payment will be 3.4% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Tianjin LVYIN Landscape and Ecology Construction

Tianjin LVYIN Landscape and Ecology Construction's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Tianjin LVYIN Landscape and Ecology Construction was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

The next year is set to see EPS grow by 21.1%. If the dividend continues on this path, the payout ratio could be 62% by next year, which we think can be pretty sustainable going forward.

Tianjin LVYIN Landscape and Ecology Construction's Dividend Has Lacked Consistency

It's comforting to see that Tianjin LVYIN Landscape and Ecology Construction has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2018, the annual payment back then was CN¥0.154, compared to the most recent full-year payment of CN¥0.25. This means that it has been growing its distributions at 8.4% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, Tianjin LVYIN Landscape and Ecology Construction's earnings per share has shrunk at approximately 5.6% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

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 Tianjin LVYIN Landscape and Ecology Construction is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Tianjin LVYIN Landscape and Ecology Construction that investors need to be conscious of moving forward. Is Tianjin LVYIN Landscape and Ecology Construction not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.