Asia Cement (China) Holdings' (HKG:743) Dividend Will Be Reduced To CN¥0.1762

Asia Cement (China) Holdings Corporation (HKG:743) has announced that on 21st of July, it will be paying a dividend ofCN¥0.1762, which a reduction from last year's comparable dividend. Based on this payment, the dividend yield will be 4.8%, which is lower than the average for the industry.

See our latest analysis for Asia Cement (China) Holdings

Asia Cement (China) Holdings' Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Asia Cement (China) Holdings was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 157.5% over the next year. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was CN¥0.10, compared to the most recent full-year payment of CN¥0.16. This means that it has been growing its distributions at 4.8% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

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. Asia Cement (China) Holdings' earnings per share has shrunk at 19% a year over 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. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

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 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for Asia Cement (China) Holdings (1 is potentially serious!) that you should be aware of before investing. Is Asia Cement (China) Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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