China Hanking Holdings (HKG:3788) Is Due To Pay A Dividend Of CN¥0.02

China Hanking Holdings Limited's (HKG:3788) investors are due to receive a payment of CN¥0.02 per share on 20th of October. This makes the dividend yield 6.0%, which will augment investor returns quite nicely.

View our latest analysis for China Hanking Holdings

China Hanking Holdings' Distributions May Be Difficult To Sustain

A big dividend yield for a few years doesn't mean much if it can't be sustained. China Hanking Holdings is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

EPS has fallen by an average of 14.9% in the past, so this could continue over the next year. This means that the company will be unprofitable, but cash flows are more important when considering the dividend and as the current cash payout ratio is pretty healthy, we don't think there is too much reason to worry.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of CN¥0.02 in 2013 to the most recent total annual payment of CN¥0.037. This means that it has been growing its distributions at 6.4% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. China Hanking Holdings might have put its house in order since then, but we remain cautious.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings per share has been sinking by 15% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

The Dividend Could Prove To Be Unreliable

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. 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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for China Hanking Holdings (1 is a bit unpleasant!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.