Stock Analysis

China State Construction International Holdings (HKG:3311) Is Increasing Its Dividend To HK$0.20

SEHK:3311
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China State Construction International Holdings Limited (HKG:3311) has announced that it will be increasing its dividend on the 7th of July to HK$0.20. The announced payment will take the dividend yield to 4.4%, which is in line with the average for the industry.

Check out our latest analysis for China State Construction International Holdings

China State Construction International Holdings' Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. China State Construction International Holdings is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

The next year is set to see EPS grow by 15.0%. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

historic-dividend
SEHK:3311 Historic Dividend June 5th 2022

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2012, the first annual payment was HK$0.12, compared to the most recent full-year payment of HK$0.41. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

China State Construction International Holdings May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, China State Construction International Holdings has only grown its earnings per share at 2.4% per annum over the past five years. While growth may be thin on the ground, China State Construction International Holdings could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On China State Construction International Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think China State Construction International Holdings' payments are rock solid. While China State Construction International Holdings is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for China State Construction International Holdings (1 is significant!) 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.