China Resources Building Materials Technology Holdings (HKG:1313) Will Pay A Smaller Dividend Than Last Year

China Resources Building Materials Technology Holdings Limited's (HKG:1313) dividend is being reduced from last year's payment covering the same period to CN¥0.006 on the 17th of July. This means that the dividend yield is 4.4%, which is a bit low when comparing to other companies in the industry.

View our latest analysis for China Resources Building Materials Technology Holdings

China Resources Building Materials Technology Holdings' Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, China Resources Building Materials Technology Holdings' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 110.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was CN¥0.0545 in 2014, and the most recent fiscal year payment was CN¥0.0432. The dividend has shrunk at around 2.3% 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 Has Limited Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been sinking by 38% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On China Resources Building Materials Technology Holdings' Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. 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. Taking the debate a bit further, we've identified 3 warning signs for China Resources Building Materials Technology Holdings 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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