Asia Allied Infrastructure Holdings (HKG:711) Has Announced That Its Dividend Will Be Reduced To HK$0.0105

Asia Allied Infrastructure Holdings Limited (HKG:711) is reducing its dividend to HK$0.0105 on the 11th of Septemberwhich is 4.5% less than last year's comparable payment of HK$0.011. This payment takes the dividend yield to 3.4%, which only provides a modest boost to overall returns.

Check out our latest analysis for Asia Allied Infrastructure Holdings

Asia Allied Infrastructure Holdings' Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Asia Allied Infrastructure Holdings was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 7.7% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 32%, 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

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of HK$0.014 in 2013 to the most recent total annual payment of HK$0.0172. This works out to be a compound annual growth rate (CAGR) of approximately 2.1% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Asia Allied Infrastructure Holdings' EPS has declined at around 7.7% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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 Asia Allied Infrastructure Holdings is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for Asia Allied Infrastructure Holdings (of which 2 don't sit too well with us!) you should know about. Is Asia Allied Infrastructure Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.