Henan Shuanghui Investment & DevelopmentLtd's (SZSE:000895) Dividend Is Being Reduced To CN¥0.70

Henan Shuanghui Investment & Development Co.,Ltd. (SZSE:000895) is reducing its dividend from last year's comparable payment to CN¥0.70 on the 26th of April. This means the annual payment is 5.3% of the current stock price, which is above the average for the industry.

View our latest analysis for Henan Shuanghui Investment & DevelopmentLtd

Henan Shuanghui Investment & DevelopmentLtd's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Earnings per share is forecast to rise by 29.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 85%, which is on the higher side, but certainly still feasible.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was CN¥0.45 in 2014, and the most recent fiscal year payment was CN¥1.45. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Henan Shuanghui Investment & DevelopmentLtd has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, Henan Shuanghui Investment & DevelopmentLtd's earnings per share has shrunk at approximately 2.1% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

We're Not Big Fans Of Henan Shuanghui Investment & DevelopmentLtd's Dividend

In summary, it's not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Henan Shuanghui Investment & DevelopmentLtd that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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