Tang Palace (China) Holdings' (HKG:1181) Dividend Will Be Reduced To CN¥0.01

Tang Palace (China) Holdings Limited's (HKG:1181) dividend is being reduced from last year's payment covering the same period to CN¥0.01 on the 25th of July. The dividend yield of 7.2% is still a nice boost to shareholder returns, despite the cut.

Tang Palace (China) Holdings Might Find It Hard To Continue The Dividend

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Tang Palace (China) Holdings is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Over the next year, EPS might fall by 26.5% based on recent performance. This means that the company will be unprofitable, but cash flows are more important when considering the dividend and as the current cash payout ratio is pretty healthy, we don't think there is too much reason to worry.

View our latest analysis for Tang Palace (China) Holdings

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was CN¥0.0208 in 2015, and the most recent fiscal year payment was CN¥0.0135. The dividend has shrunk at around 4.2% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Tang Palace (China) Holdings' EPS has fallen by approximately 27% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Tang Palace (China) Holdings' Dividend Doesn't Look Sustainable

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. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

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. Just as an example, we've come across 3 warning signs for Tang Palace (China) Holdings you should be aware of, and 1 of them is significant. If you are a dividend investor, you might also want to look at our curated list of high yield 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.