Changsha Tongcheng HoldingsLtd (SZSE:000419) Has Announced That Its Dividend Will Be Reduced To CN¥0.12

Changsha Tongcheng Holdings Co.Ltd (SZSE:000419) is reducing its dividend from last year's comparable payment to CN¥0.12 on the 9th of August. The dividend yield of 2.8% is still a nice boost to shareholder returns, despite the cut.

View our latest analysis for Changsha Tongcheng HoldingsLtd

Changsha Tongcheng HoldingsLtd's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Changsha Tongcheng HoldingsLtd's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to fall by 0.6% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 50%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from CN¥0.10 total annually to CN¥0.12. This works out to be a compound annual growth rate (CAGR) of approximately 1.8% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Changsha Tongcheng HoldingsLtd May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Changsha Tongcheng HoldingsLtd hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Changsha Tongcheng HoldingsLtd's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Changsha Tongcheng HoldingsLtd is a great stock to add to your portfolio if income is your focus.

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 Changsha Tongcheng HoldingsLtd you should be aware of, and 1 of them is a bit unpleasant. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.

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