Tenfu (Cayman) Holdings (HKG:6868) Has Announced That Its Dividend Will Be Reduced To CN¥0.02

Tenfu (Cayman) Holdings Company Limited (HKG:6868) has announced that on 29th of September, it will be paying a dividend ofCN¥0.02, which a reduction from last year's comparable dividend. This means that the annual payment is 3.5% of the current stock price, which is lower than what the rest of the industry is paying.

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Tenfu (Cayman) Holdings' Projections Indicate Future Payments May Be Unsustainable

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 this announcement, Tenfu (Cayman) Holdings was paying out 81% of earnings, but a comparatively small 53% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

EPS is set to fall by 14.0% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 108%, which could put the dividend in jeopardy if the company's earnings don't improve.

Check out our latest analysis for Tenfu (Cayman) Holdings

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was CN¥0.166, compared to the most recent full-year payment of CN¥0.097. This works out to be a decline of approximately 5.2% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Tenfu (Cayman) Holdings' EPS has fallen by approximately 14% 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.

Our Thoughts On Tenfu (Cayman) Holdings' Dividend

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 company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

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 doesn't sit too well with us!) that you should be aware of before investing. Is Tenfu (Cayman) Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.