CR Construction Group Holdings (HKG:1582) Will Pay A Smaller Dividend Than Last Year

CR Construction Group Holdings Limited (HKG:1582) is reducing its dividend to HK$0.015 on the 29th of Septemberwhich is 40% less than last year's comparable payment of HK$0.025. This means the annual payment is 9.2% of the current stock price, which is above the average for the industry.

Check out our latest analysis for CR Construction Group Holdings

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't 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 78.7% 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 reach 104%, which could put the dividend under pressure if earnings don't start to improve.

CR Construction Group Holdings' Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2020, the annual payment back then was HK$0.05, compared to the most recent full-year payment of HK$0.043. This works out to be a decline of approximately 4.9% per year over that time. 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 79% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Our Thoughts On CR Construction Group Holdings' Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 4 warning signs for CR Construction Group Holdings you should be aware of, and 2 of them are a bit unpleasant. 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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