Tian Chang Group Holdings (HKG:2182) Has Announced That Its Dividend Will Be Reduced To HK$0.015

Tian Chang Group Holdings Ltd. (HKG:2182) has announced that on 28th of June, it will be paying a dividend ofHK$0.015, which a reduction from last year's comparable dividend. This payment takes the dividend yield to 3.0%, which only provides a modest boost to overall returns.

See our latest analysis for Tian Chang Group Holdings

Tian Chang Group Holdings' Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Tian Chang Group Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, EPS could fall by 21.6% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 41%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Tian Chang Group Holdings' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. Since 2019, the dividend has gone from HK$0.03 total annually to HK$0.015. This works out to a decline of approximately 50% over that time. 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.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Tian Chang Group Holdings' EPS has fallen by approximately 22% per year during the past 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.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 4 warning signs for Tian Chang Group Holdings (of which 1 can't be ignored!) you should know about. Is Tian Chang Group Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.