Tenfu (Cayman) Holdings (HKG:6868) Is Reducing Its Dividend To CN¥0.13

Tenfu (Cayman) Holdings Company Limited (HKG:6868) has announced that on 31st of May, it will be paying a dividend ofCN¥0.13, which a reduction from last year's comparable dividend. The dividend yield will be in the average range for the industry at 3.5%.

Check out our latest analysis for Tenfu (Cayman) Holdings

Tenfu (Cayman) Holdings Is Paying Out More Than It Is Earning

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before this announcement, Tenfu (Cayman) Holdings was paying out 74% of earnings, but a comparatively small 68% 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 0.9% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 102%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of CN¥0.13 in 2013 to the most recent total annual payment of CN¥0.14. Dividend payments have been growing, but very slowly over the period. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Although it's important to note that Tenfu (Cayman) Holdings' 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.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Tenfu (Cayman) Holdings is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Tenfu (Cayman) Holdings 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.