Zhong Ao Home Group (HKG:1538) Has Announced A Dividend Of CN¥0.025

Zhong Ao Home Group Limited's (HKG:1538) investors are due to receive a payment of CN¥0.025 per share on 5th of July. This means the dividend yield will be fairly typical at 6.6%.

Check out our latest analysis for Zhong Ao Home Group

Zhong Ao Home Group's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, Zhong Ao Home Group's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 4.6% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 27%, which is definitely feasible to continue.

Zhong Ao Home Group's Dividend Has Lacked Consistency

Looking back, Zhong Ao Home Group's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2016, the dividend has gone from CN¥0.021 total annually to CN¥0.0231. This implies that the company grew its distributions at a yearly rate of about 1.2% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth May Be Hard To Achieve

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. It's not great to see that Zhong Ao Home Group's earnings per share has fallen at approximately 4.6% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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 would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Zhong Ao Home Group (1 can't be ignored!) that you should be aware of before investing. Is Zhong Ao Home Group 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.