Vanke Overseas Investment Holding (HKG:1036) Has Announced A Dividend Of HK$0.06

Vanke Overseas Investment Holding Company Limited's (HKG:1036) investors are due to receive a payment of HK$0.06 per share on 30th of June. Including this payment, the dividend yield on the stock will be 4.1%, which is a modest boost for shareholders' returns.

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Vanke Overseas Investment Holding's Distributions May Be Difficult To Sustain

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Even though Vanke Overseas Investment Holding isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. 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.

Looking forward, earnings per share could fall by 40.1% over the next year if the trend of the last few years can't be broken. 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.

Check out our latest analysis for Vanke Overseas Investment Holding

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was HK$0.03 in 2015, and the most recent fiscal year payment was HK$0.06. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Vanke Overseas Investment Holding's earnings per share has shrunk at 40% 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.

Vanke Overseas Investment Holding's 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 Vanke Overseas Investment Holding's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 3 warning signs for Vanke Overseas Investment Holding (of which 1 is significant!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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