CR Construction Group Holdings (HKG:1582) Is Due To Pay A Dividend Of HK$0.018

The board of CR Construction Group Holdings Limited (HKG:1582) has announced that it will pay a dividend of HK$0.018 per share on the 26th of July. The dividend yield will be 7.5% based on this payment which is still above the industry average.

Check out our latest analysis for CR Construction Group Holdings

CR Construction Group Holdings' Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, CR Construction Group Holdings was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, EPS could fall by 3.9% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 19%, which we are pretty comfortable with and we think is feasible on an earnings basis.

CR Construction Group Holdings' Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The annual payment during the last 4 years was HK$0.05 in 2020, and the most recent fiscal year payment was HK$0.033. Doing the maths, this is a decline of about 9.9% per year. 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. It's not great to see that CR Construction Group Holdings' earnings per share has fallen at approximately 3.9% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Our Thoughts On CR Construction Group Holdings' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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 CR Construction Group Holdings is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for CR Construction Group Holdings (2 are a bit unpleasant!) 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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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.