Huatai Securities (SHSE:601688) Has Announced That Its Dividend Will Be Reduced To CN¥0.43

Huatai Securities Co., Ltd. (SHSE:601688) has announced that on 16th of August, it will be paying a dividend ofCN¥0.43, which a reduction from last year's comparable dividend. However, the dividend yield of 3.4% is still a decent boost to shareholder returns.

View our latest analysis for Huatai Securities

Huatai Securities' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Huatai Securities' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 36.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was CN¥0.15 in 2014, and the most recent fiscal year payment was CN¥0.432. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Huatai Securities has been growing its earnings per share at 11% a year over the past five years. Huatai Securities definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Huatai Securities' Dividend

Overall, we think that Huatai Securities could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Huatai Securities that you should be aware of before investing. Is Huatai Securities not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.