Chinney Alliance Group (HKG:385) Will Pay A Smaller Dividend Than Last Year

Chinney Alliance Group Limited (HKG:385) is reducing its dividend to HK$0.028 on the 6th of July. This means that the dividend yield is 3.5%, which is a bit low when comparing to other companies in the industry.

See our latest analysis for Chinney Alliance Group

Chinney Alliance Group's Earnings Easily Cover the Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Chinney Alliance Group's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Unless the company can turn things around, EPS could fall by 18.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 25%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the dividend has gone from HK$0.03 to HK$0.028. Payments have been decreasing at a very slow pace in this time period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

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. Chinney Alliance Group's earnings per share has shrunk at 18% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. 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 don't think Chinney Alliance Group is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 4 warning signs for Chinney Alliance Group you should be aware of, and 1 of them makes us a bit uncomfortable. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.