Carpenter Tan Holdings' (HKG:837) Dividend Will Be Reduced To CN¥0.3663

Carpenter Tan Holdings Limited (HKG:837) has announced that on 30th of June, it will be paying a dividend ofCN¥0.3663, which a reduction from last year's comparable dividend. The yield is still above the industry average at 6.2%.

Our free stock report includes 1 warning sign investors should be aware of before investing in Carpenter Tan Holdings. Read for free now.

Carpenter Tan Holdings' Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Carpenter Tan Holdings' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share could rise by 6.9% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 51% by next year, which is in a pretty sustainable range.

See our latest analysis for Carpenter Tan Holdings

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was CN¥0.258, compared to the most recent full-year payment of CN¥0.344. This means that it has been growing its distributions at 2.9% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Carpenter Tan Holdings Could Grow Its Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Carpenter Tan Holdings has grown earnings per share at 6.9% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Our Thoughts On Carpenter Tan Holdings' Dividend

Overall, we think that Carpenter Tan Holdings could make a reasonable income stock, even though it did cut the dividend this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. Taking the debate a bit further, we've identified 1 warning sign for Carpenter Tan Holdings that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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