Chaowei Power Holdings (HKG:951) Has Announced That Its Dividend Will Be Reduced To CN¥0.053

Chaowei Power Holdings Limited (HKG:951) has announced that on 17th of July, it will be paying a dividend ofCN¥0.053, which a reduction from last year's comparable dividend. The dividend yield will be in the average range for the industry at 3.8%.

See our latest analysis for Chaowei Power Holdings

Chaowei Power Holdings' Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, Chaowei Power Holdings' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 3.3% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 16%, which is definitely feasible to continue.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was CN¥0.093 in 2014, and the most recent fiscal year payment was CN¥0.0489. The dividend has shrunk at around 6.2% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. It's not great to see that Chaowei Power Holdings' earnings per share has fallen at approximately 3.3% per year over the past five years. 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.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 4 warning signs for Chaowei Power Holdings you should be aware of, and 2 of them are potentially serious. If you are a dividend investor, you might also want to look at our curated list of high yield 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.