Zuoli Kechuang Micro-finance's (HKG:6866) Dividend Is Being Reduced To CN¥0.0139

Zuoli Kechuang Micro-finance Company Limited's (HKG:6866) dividend is being reduced from last year's payment covering the same period to CN¥0.0139 on the 29th of August. Based on this payment, the dividend yield will be 4.8%, which is lower than the average for the industry.

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Zuoli Kechuang Micro-finance's Payment Could Potentially Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Zuoli Kechuang Micro-finance was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, EPS could fall by 21.2% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 42%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

See our latest analysis for Zuoli Kechuang Micro-finance

Zuoli Kechuang Micro-finance's Dividend Has Lacked Consistency

Looking back, Zuoli Kechuang Micro-finance's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2016, the dividend has gone from CN¥0.14 total annually to CN¥0.0127. This works out to a decline of approximately 91% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Zuoli Kechuang Micro-finance's EPS has fallen by approximately 21% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

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. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

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. For example, we've identified 4 warning signs for Zuoli Kechuang Micro-finance (1 is potentially serious!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.