CR Construction Group Holdings (HKG:1582) Is Paying Out A Dividend Of HK$0.018

CR Construction Group Holdings Limited's (HKG:1582) investors are due to receive a payment of HK$0.018 per share on 28th of July. The dividend yield will be 9.3% based on this payment which is still above the industry average.

See our latest analysis for CR Construction Group Holdings

CR Construction Group Holdings Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, CR Construction Group Holdings' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

If the company can't turn things around, EPS could fall by 79.0% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 181%, which could put the dividend under pressure if earnings don't start to improve.

CR Construction Group Holdings' Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2020, the annual payment back then was HK$0.05, compared to the most recent full-year payment of HK$0.043. The dividend has shrunk at around 4.9% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. CR Construction Group Holdings' EPS has fallen by approximately 79% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. 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. However, there are other things to consider for investors when analysing stock performance. To that end, CR Construction Group Holdings has 3 warning signs (and 1 which doesn't sit too well with us) 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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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.