Greentown Management Holdings (HKG:9979) Will Pay A Smaller Dividend Than Last Year

Greentown Management Holdings Company Limited (HKG:9979) is reducing its dividend from last year's comparable payment to CN¥0.2624 on the 18th of July. This means the annual payment is 9.3% of the current stock price, which is above the average for the industry.

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Greentown Management Holdings' Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Greentown Management Holdings' dividend was only 59% of earnings, however it was paying out 178% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Earnings per share is forecast to rise by 2.6% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 79% which is a bit high but can definitely be sustainable.

View our latest analysis for Greentown Management Holdings

Greentown Management Holdings' Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The annual payment during the last 4 years was CN¥0.17 in 2021, and the most recent fiscal year payment was CN¥0.24. This implies that the company grew its distributions at a yearly rate of about 9.0% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

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. It's encouraging to see that Greentown Management Holdings has been growing its earnings per share at 11% a year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, Greentown Management Holdings has 2 warning signs (and 1 which is a bit concerning) we think you should know about. Is Greentown Management Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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