Anhui Provincial Architectural Design and Research InstituteLtd (SZSE:301167) Is Paying Out Less In Dividends Than Last Year

Anhui Provincial Architectural Design and Research Institute Co.,Ltd. (SZSE:301167) has announced that on 31st of May, it will be paying a dividend ofCN¥0.216, which a reduction from last year's comparable dividend. This means that the annual payment will be 1.7% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Anhui Provincial Architectural Design and Research InstituteLtd

Anhui Provincial Architectural Design and Research InstituteLtd's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Anhui Provincial Architectural Design and Research InstituteLtd's dividend was only 56% of earnings, however it was paying out 227% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, EPS could fall by 9.6% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 61%, which is definitely feasible to continue.

Anhui Provincial Architectural Design and Research InstituteLtd Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. The dividend has gone from an annual total of CN¥0.143 in 2022 to the most recent total annual payment of CN¥0.216. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Dividend Growth Is Doubtful

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. Over the past five years, it looks as though Anhui Provincial Architectural Design and Research InstituteLtd's EPS has declined at around 9.6% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Anhui Provincial Architectural Design and Research InstituteLtd's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While Anhui Provincial Architectural Design and Research InstituteLtd 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.

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. Case in point: We've spotted 4 warning signs for Anhui Provincial Architectural Design and Research InstituteLtd (of which 1 can't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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