China Hanking Holdings' (HKG:3788) Dividend Will Be CN¥0.02

China Hanking Holdings Limited's (HKG:3788) investors are due to receive a payment of CN¥0.02 per share on 16th of June. This makes the dividend yield 3.4%, which will augment investor returns quite nicely.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that China Hanking Holdings' stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

We've discovered 2 warning signs about China Hanking Holdings. View them for free.

China Hanking Holdings' Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, China Hanking Holdings' dividend was only 40% of earnings, however it was paying out 155% of free cash flows. 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.

EPS is set to fall by 12.4% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 51%, which is definitely feasible to continue.

Check out our latest analysis for China Hanking Holdings

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from CN¥0.02 total annually to CN¥0.0369. This means that it has been growing its distributions at 6.3% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

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. Over the past five years, it looks as though China Hanking Holdings' EPS has declined at around 12% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

China Hanking Holdings' Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about China Hanking Holdings' payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, China Hanking Holdings has 2 warning signs (and 1 which is concerning) we think you should know about. Is China Hanking Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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