Yuexiu Property Company Limited's (HKG:123) dividend is being reduced from last year's payment covering the same period to CN¥0.307 on the 6th of July. The yield is still above the industry average at 7.0%.
Check out our latest analysis for Yuexiu Property
Yuexiu Property's Dividend Is Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Yuexiu Property's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Looking forward, earnings per share is forecast to rise by 34.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 40%, which is in the range that makes us comfortable with the sustainability of the dividend.
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. Since 2013, the annual payment back then was CN¥0.26, compared to the most recent full-year payment of CN¥0.547. This works out to be a compound annual growth rate (CAGR) of approximately 7.7% a year 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. Yuexiu Property might have put its house in order since then, but we remain cautious.
Yuexiu Property Could Grow Its Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Yuexiu Property has grown earnings per share at 7.0% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.
In Summary
Overall, we think that Yuexiu Property could make a reasonable income stock, even though it did cut the dividend this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Yuexiu Property has 2 warning signs (and 1 which can't be ignored) we think you should know about. Is Yuexiu Property not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
About SEHK:123
Yuexiu Property
Develops, sells, and manages properties primarily in Mainland China and Hong Kong.
Good value with adequate balance sheet.
