Tenfu (Cayman) Holdings (HKG:6868) Will Pay A Larger Dividend Than Last Year At HK$0.23

Published
May 18, 2022
SEHK:6868
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The board of Tenfu (Cayman) Holdings Company Limited (HKG:6868) has announced that it will be increasing its dividend on the 31st of May to HK$0.23. This will take the dividend yield from 5.5% to 5.8%, providing a nice boost to shareholder returns.

Check out our latest analysis for Tenfu (Cayman) Holdings

Tenfu (Cayman) Holdings' Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Tenfu (Cayman) Holdings' dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 129% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

EPS is set to grow by 19.5% over the next year if recent trends continue. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 91%, which is on the higher side, but certainly still feasible.

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SEHK:6868 Historic Dividend May 18th 2022

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from CN¥0.13 in 2012 to the most recent annual payment of CN¥0.25. This works out to be a compound annual growth rate (CAGR) of approximately 6.8% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Tenfu (Cayman) Holdings might have put its house in order since then, but we remain cautious.

Dividend Growth Could Be Constrained

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. It's encouraging to see Tenfu (Cayman) Holdings has been growing its earnings per share at 20% a year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Tenfu (Cayman) Holdings' Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Tenfu (Cayman) Holdings will make a great income stock. Strong earnings growth means Tenfu (Cayman) Holdings has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would probably look elsewhere for an income investment.

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. For example, we've picked out 1 warning sign for Tenfu (Cayman) Holdings 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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