Shanghai Pioneer Holding's (HKG:1345) Shareholders Will Receive A Smaller Dividend Than Last Year

Shanghai Pioneer Holding Ltd (HKG:1345) has announced that on 15th of June, it will be paying a dividend ofCN¥0.048, which a reduction from last year's comparable dividend. Despite the cut, the dividend yield of 2.6% will still be comparable to other companies in the industry.

See our latest analysis for Shanghai Pioneer Holding

Shanghai Pioneer Holding's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Shanghai Pioneer Holding was paying a whopping 377% as a dividend, but this only made up 29% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Unless the company can turn things around, EPS could fall by 1.8% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 32%, which is definitely feasible to continue.

Shanghai Pioneer Holding's Dividend Has Lacked Consistency

Shanghai Pioneer Holding has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2014, the dividend has gone from CN¥0.107 total annually to CN¥0.0577. The dividend has shrunk at around 6.6% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Unfortunately, Shanghai Pioneer Holding's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Shanghai Pioneer Holding's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While Shanghai Pioneer Holding is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Shanghai Pioneer Holding that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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