CSSC Offshore & Marine Engineering (Group)'s (HKG:317) Dividend Will Be Reduced To HK$0.16

CSSC Offshore & Marine Engineering (Group) Company Limited's (HKG:317) dividend is being reduced to HK$0.16 on the 13th of July. Despite the cut, the dividend yield of 3.0% will still be comparable to other companies in the industry.

View our latest analysis for CSSC Offshore & Marine Engineering (Group)

CSSC Offshore & Marine Engineering (Group) Is Paying Out More Than It Is Earning

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, CSSC Offshore & Marine Engineering (Group)'s profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

If the company can't turn things around, EPS could fall by 0.4% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 342%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the dividend has gone from CN¥0.077 to CN¥0.14. This means that it has been growing its distributions at 6.0% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. CSSC Offshore & Marine Engineering (Group) might have put its house in order since then, but we remain cautious.

CSSC Offshore & Marine Engineering (Group) May Find It Hard To Grow The Dividend

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. However, CSSC Offshore & Marine Engineering (Group)'s EPS was effectively flat over the past five years, which could stop the company from paying more every year.

CSSC Offshore & Marine Engineering (Group)'s Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

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. For example, we've picked out 4 warning signs for CSSC Offshore & Marine Engineering (Group) that investors should know about before committing capital to this stock. Is CSSC Offshore & Marine Engineering (Group) 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.