Vanke Overseas Investment Holding (HKG:1036) Has Announced That Its Dividend Will Be Reduced To HK$0.06

Vanke Overseas Investment Holding Company Limited's (HKG:1036) dividend is being reduced by 33% to HK$0.06 per share on 2nd of July, in comparison to last year's comparable payment of HK$0.09. Despite the cut, the dividend yield of 6.8% will still be comparable to other companies in the industry.

Check out our latest analysis for Vanke Overseas Investment Holding

Vanke Overseas Investment Holding Doesn't Earn Enough To Cover Its Payments

We aren't too impressed by dividend yields unless they can be sustained over time. Vanke Overseas Investment Holding isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. This is quite a strong warning sign that the dividend may not be sustainable.

If the company can't turn things around, EPS could fall by 47.2% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 184%, which could put the dividend under pressure if earnings don't start to improve.

Vanke Overseas Investment Holding Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was HK$0.03 in 2014, and the most recent fiscal year payment was HK$0.09. This means that it has been growing its distributions at 12% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Earnings per share has been sinking by 47% 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.

Vanke Overseas Investment Holding's Dividend Doesn't Look Sustainable

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. Dividend payments have been pretty consistent for a while, but we do think the payout ratios are a little bit high. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 4 warning signs for Vanke Overseas Investment Holding you should be aware of, and 2 of them shouldn't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.