China State Construction International Holdings (HKG:3311) Is Paying Out A Larger Dividend Than Last Year

China State Construction International Holdings Limited's (HKG:3311) dividend will be increasing from last year's payment of the same period to HK$0.33 on 10th of October. The payment will take the dividend yield to 5.8%, 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' Earnings Easily Cover The Distributions

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. 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 35.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 HK$0.18, compared to the most recent full-year payment of HK$0.66. This means that it has been growing its distributions at 14% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that China State Construction International Holdings has grown earnings per share at 15% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for China State Construction International Holdings' prospects of growing its dividend payments in the future.

Our Thoughts On China State Construction International Holdings' Dividend

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

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for China State Construction International Holdings you should be aware of, and 1 of them can't be ignored. Is China State Construction International Holdings 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.