China Taiping Insurance Holdings (HKG:966) Will Pay A Smaller Dividend Than Last Year

China Taiping Insurance Holdings Company Limited's (HKG:966) dividend is being reduced from last year's payment covering the same period to HK$0.26 on the 21st of July. This means that the annual payment is 3.2% of the current stock price, which is lower than what the rest of the industry is paying.

View our latest analysis for China Taiping Insurance Holdings

China Taiping Insurance Holdings' Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, China Taiping Insurance Holdings' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 198.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 14%, which is in the range that makes us comfortable with the sustainability of the dividend.

China Taiping Insurance Holdings' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2017, the dividend has gone from HK$0.10 total annually to HK$0.26. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 14% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for China Taiping Insurance Holdings that investors should take into consideration. 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.