CITIC (HKG:267) Will Pay A Dividend Of CN¥0.2079

The board of CITIC Limited (HKG:267) has announced that it will pay a dividend on the 15th of November, with investors receiving CN¥0.2079 per share. Based on this payment, the dividend yield for the company will be 7.3%, which is fairly typical for the industry.

View our latest analysis for CITIC

CITIC's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, CITIC's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 10.0%. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was CN¥0.275, compared to the most recent full-year payment of CN¥0.515. This means that it has been growing its distributions at 6.5% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings has been rising at 4.3% per annum over the last five years, which admittedly is a bit slow. While EPS growth is quite low, CITIC has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On CITIC's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While CITIC is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for CITIC that you should be aware of before investing. Is CITIC not quite the opportunity you were looking for? Why not check out our selection of top 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.