China Aircraft Leasing Group Holdings (HKG:1848) Will Pay A Dividend Of HK$0.15

The board of China Aircraft Leasing Group Holdings Limited (HKG:1848) has announced that it will pay a dividend on the 31st of October, with investors receiving HK$0.15 per share. Including this payment, the dividend yield on the stock will be 8.4%, which is a modest boost for shareholders' returns.

Check out our latest analysis for China Aircraft Leasing Group Holdings

China Aircraft Leasing Group Holdings' Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

Analysts expect a massive rise in earnings per share in the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 32% which is fairly sustainable.

China Aircraft Leasing Group Holdings' Dividend Has Lacked Consistency

Looking back, China Aircraft Leasing Group Holdings' dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 7 years was HK$0.16 in 2015, and the most recent fiscal year payment was HK$0.41. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. China Aircraft Leasing Group Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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. Over the past five years, it looks as though China Aircraft Leasing Group Holdings' EPS has declined at around 34% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

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

Overall, while some might be pleased that the dividend wasn't cut, we think this may help China Aircraft Leasing Group Holdings make more consistent payments in the future. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, the dividend is not reliable enough to make this a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, China Aircraft Leasing Group Holdings has 4 warning signs (and 3 which can't be ignored) 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.