China 21st Century Education Group (HKG:1598) Will Pay A Smaller Dividend Than Last Year

China 21st Century Education Group Limited's (HKG:1598) dividend is being reduced to HK$0.0063 on the 29th of July. This means that the dividend yield is 1.4%, which is a bit low when comparing to other companies in the industry.

View our latest analysis for China 21st Century Education Group

China 21st Century Education Group's Earnings Easily Cover the Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, China 21st Century Education Group was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 6.7%, so there isn't too much pressure on the dividend.

China 21st Century Education Group's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. Since 2020, the first annual payment was CN¥0.02, compared to the most recent full-year payment of CN¥0.013. Dividend payments have fallen sharply, down 37% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. China 21st Century Education Group's earnings per share has shrunk at 27% a year over the past three years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

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. 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. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 3 warning signs for China 21st Century Education Group that investors should take into consideration. Is China 21st Century Education Group not quite the opportunity you were looking for? Why not check out our selection of top 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.