Tenfu (Cayman) Holdings (HKG:6868) Has Announced A Dividend Of CN¥0.12

The board of Tenfu (Cayman) Holdings Company Limited (HKG:6868) has announced that it will pay a dividend of CN¥0.12 per share on the 29th of May. This means that the annual payment is 4.0% of the current stock price, which is lower than what the rest of the industry is paying.

Check out our latest analysis for Tenfu (Cayman) Holdings

Tenfu (Cayman) Holdings' Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Tenfu (Cayman) Holdings' dividend made up quite a large proportion of earnings but only of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

If the company can't turn things around, EPS could fall by 2.2% over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 92% in the next 12 months which is on the higher end of the range we would say is sustainable.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from CN¥0.22 total annually to CN¥0.156. This works out to be a decline of approximately 3.4% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Tenfu (Cayman) Holdings May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's not great to see that Tenfu (Cayman) Holdings' earnings per share has fallen at approximately 2.2% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On Tenfu (Cayman) Holdings' Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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. We would probably look elsewhere for an income investment.

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 example, we've identified 2 warning signs for Tenfu (Cayman) Holdings (1 is significant!) 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.