China Resources Building Materials Technology Holdings' (HKG:1313) Shareholders Will Receive 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 annual payment is 3.1% of the current stock price, which is lower than what the rest of the industry is paying.

Check out our latest analysis for China Resources Building Materials Technology Holdings

China Resources Building Materials Technology Holdings' Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, China Resources Building Materials Technology Holdings was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

The next year is set to see EPS grow by 99.9%. If the dividend continues on this path, the payout ratio could be 28% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from CN¥0.0545 total annually to CN¥0.0432. Doing the maths, this is a decline of about 2.3% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though China Resources Building Materials Technology Holdings' EPS has declined at around 37% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. 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.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While China Resources Building Materials Technology Holdings is earning enough to cover the payments, the cash flows are lacking. We don't think China Resources Building Materials Technology Holdings is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for China Resources Building Materials Technology Holdings that investors should know about before committing capital to this stock. Is China Resources Building Materials Technology 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.