Anhui Provincial Architectural Design and Research InstituteLtd's (SZSE:301167) Dividend Will Be Reduced To CN¥0.216

Anhui Provincial Architectural Design and Research Institute Co.,Ltd.'s (SZSE:301167) dividend is being reduced from last year's payment covering the same period to CN¥0.216 on the 31st of May. 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.

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

Anhui Provincial Architectural Design and Research InstituteLtd's Dividend Is Well Covered By Earnings

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. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut 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 Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2022, the annual payment back then was CN¥0.143, compared to the most recent full-year payment of CN¥0.216. This means that it has been growing its distributions at 23% per annum over that time. 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 May Be Hard To Come By

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. 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

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Anhui Provincial Architectural Design and Research InstituteLtd has 4 warning signs (and 1 which is potentially serious) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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