Chaowei Power Holdings (HKG:951) Is Paying Out Less In Dividends Than Last Year

Chaowei Power Holdings Limited (HKG:951) has announced that on 14th of July, it will be paying a dividend ofCN¥0.066, which a reduction from last year's comparable dividend. However, the dividend yield of 3.9% still remains in a typical range for the industry.

See our latest analysis for Chaowei Power Holdings

Chaowei Power Holdings' Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Chaowei Power Holdings was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

EPS is set to fall by 1.6% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 17%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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¥0.148 in 2013, and the most recent fiscal year payment was CN¥0.0577. This works out to be a decline of approximately 9.0% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Chaowei Power Holdings hasn't seen much change in its earnings per share over the last five years.

Chaowei Power Holdings' Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Chaowei Power Holdings has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. 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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