Guangdong Guanghong HoldingsLtd (SZSE:000529) Is Due To Pay A Dividend Of CN¥0.15

Guangdong Guanghong Holdings Co.,Ltd. (SZSE:000529) has announced that it will pay a dividend of CN¥0.15 per share on the 4th of July. Based on this payment, the dividend yield will be 2.6%, which is fairly typical for the industry.

View our latest analysis for Guangdong Guanghong HoldingsLtd

Guangdong Guanghong HoldingsLtd's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Guangdong Guanghong HoldingsLtd was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, earnings per share could rise by 3.1% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 48% by next year, which is in a pretty sustainable range.

Guangdong Guanghong HoldingsLtd Is Still Building Its Track Record

Guangdong Guanghong HoldingsLtd's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 7 years was CN¥0.045 in 2017, and the most recent fiscal year payment was CN¥0.15. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Earnings per share has been crawling upwards at 3.1% per year. Growth of 3.1% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Guangdong Guanghong HoldingsLtd's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Guangdong Guanghong HoldingsLtd you should be aware of, and 1 of them can't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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