Yihai International Holding (HKG:1579) Is Due To Pay A Dividend Of CN¥0.4283

The board of Yihai International Holding Ltd. (HKG:1579) has announced that it will pay a dividend of CN¥0.4283 per share on the 26th of June. Despite the cut, the dividend yield of 6.5% will still be comparable to other companies in the industry.

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Yihai International Holding's Payment Could Potentially Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. At the time of the last dividend payment, Yihai International Holding was paying out a very large proportion of what it was earning and 116% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Earnings per share is forecast to rise by 35.9% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 95% - on the higher side, but we wouldn't necessarily say this is unsustainable.

See our latest analysis for Yihai International Holding

Yihai International Holding's Dividend Has Lacked Consistency

Yihai International Holding has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The annual payment during the last 7 years was CN¥0.0498 in 2018, and the most recent fiscal year payment was CN¥0.79. This means that it has been growing its distributions at 48% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Yihai International Holding May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Although it's important to note that Yihai International Holding's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

The Dividend Could Prove To Be Unreliable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Yihai International Holding that investors should know about before committing capital to this stock. 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.