China Aircraft Leasing Group Holdings (HKG:1848) Is Reducing Its Dividend To HK$0.12

China Aircraft Leasing Group Holdings Limited's (HKG:1848) dividend is being reduced from last year's payment covering the same period to HK$0.12 on the 7th of October. Despite the cut, the dividend yield of 8.3% will still be comparable to other companies in the industry.

View our latest analysis for China Aircraft Leasing Group Holdings

China Aircraft Leasing Group Holdings' Distributions May Be Difficult To Sustain

Unless the payments are sustainable, the dividend yield doesn't mean too much. Despite not generating a profit, China Aircraft Leasing Group Holdings is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Analysts expect the EPS to grow by 74.7% over the next 12 months. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. Unless this can be done in short order, the dividend might be difficult to sustain.

China Aircraft Leasing Group Holdings' Dividend Has Lacked Consistency

Looking back, China Aircraft Leasing Group Holdings' dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 9 years was HK$0.16 in 2015, and the most recent fiscal year payment was HK$0.24. This works out to be a compound annual growth rate (CAGR) of approximately 4.6% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though China Aircraft Leasing Group Holdings' EPS has declined at around 48% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

China Aircraft Leasing Group Holdings' Dividend Doesn't Look Great

To sum up, we don't like when dividends are cut, but in this case the dividend may have been too high to begin with. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. The dividend doesn't inspire confidence that it will provide solid income in the future.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for China Aircraft Leasing Group Holdings that you should be aware of before investing. 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.