Vanke Overseas Investment Holding (HKG:1036) Will Pay A Dividend Of HK$0.09

Vanke Overseas Investment Holding Company Limited's (HKG:1036) investors are due to receive a payment of HK$0.09 per share on 12th of July. Based on this payment, the dividend yield will be 4.7%, which is fairly typical for the industry.

See our latest analysis for Vanke Overseas Investment Holding

Vanke Overseas Investment Holding Is Paying Out More Than It Is Earning

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Vanke Overseas Investment Holding's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

If the company can't turn things around, EPS could fall by 28.9% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 209%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of HK$0.66 in 2013 to the most recent total annual payment of HK$0.09. The dividend has fallen 86% over that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Over the past five years, it looks as though Vanke Overseas Investment Holding's EPS has declined at around 29% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

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

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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. We don't think Vanke Overseas Investment Holding is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 5 warning signs for Vanke Overseas Investment Holding (1 doesn't sit too well with us!) 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.