Tingyi (Cayman Islands) Holding (HKG:322) Will Pay A Smaller Dividend Than Last Year

Tingyi (Cayman Islands) Holding Corp. (HKG:322) has announced that on 14th of December, it will be paying a dividend ofCN¥0.5202, which a reduction from last year's comparable dividend. However, the dividend yield of 10.0% is still a decent boost to shareholder returns.

Our analysis indicates that 322 is potentially undervalued!

Tingyi (Cayman Islands) Holding Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last dividend, Tingyi (Cayman Islands) Holding is earning enough to cover the payment, but then it makes up 1,230% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

The next 12 months is set to see EPS grow by 51.7%. If the dividend continues on its recent course, the payout ratio in 12 months could be 200%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was CN¥0.236 in 2012, and the most recent fiscal year payment was CN¥1.19. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Tingyi (Cayman Islands) Holding has been growing its earnings per share at 16% a year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. As an example, we've identified 1 warning sign for Tingyi (Cayman Islands) Holding 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.