Zhongtai Futures (HKG:1461) Will Pay A Smaller Dividend Than Last Year

Zhongtai Futures Company Limited (HKG:1461) has announced that on 8th of August, it will be paying a dividend ofCN¥0.0153, which a reduction from last year's comparable dividend. This payment takes the dividend yield to 3.0%, which only provides a modest boost to overall returns.

Check out our latest analysis for Zhongtai Futures

Zhongtai Futures' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Zhongtai Futures' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 2.6% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 9.5%, which is in the range that makes us comfortable with the sustainability of the dividend.

Zhongtai Futures' Dividend Has Lacked Consistency

Zhongtai Futures has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2016, the dividend has gone from CN¥0.043 total annually to CN¥0.014. Dividend payments have fallen sharply, down 67% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Earnings has been rising at 2.6% per annum over the last five years, which admittedly is a bit slow. If Zhongtai Futures is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Zhongtai Futures' Dividend

Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Zhongtai Futures that investors need to be conscious of moving forward. Is Zhongtai Futures not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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