Yuexiu Property's (HKG:123) Shareholders Will Receive A Smaller Dividend Than Last Year

Yuexiu Property Company Limited (HKG:123) is reducing its dividend from last year's comparable payment to CN¥0.307 on the 6th of July. However, the dividend yield of 5.7% still remains in a typical range for the industry.

View our latest analysis for Yuexiu Property

Yuexiu Property's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last dividend was quite easily covered by Yuexiu Property's earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 36.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 40% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of CN¥0.26 in 2013 to the most recent total annual payment of CN¥0.547. This means that it has been growing its distributions at 7.7% per annum 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.

We Could See Yuexiu Property's Dividend Growing

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Yuexiu Property has grown earnings per share at 7.0% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Yuexiu Property's Dividend

Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Yuexiu Property you should be aware of, and 1 of them shouldn't be ignored. 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.