Chinney Investments (HKG:216) Has Affirmed Its Dividend Of HK$0.05

The board of Chinney Investments, Limited (HKG:216) has announced that it will pay a dividend of HK$0.05 per share on the 10th of October. This means that the annual payment will be 4.5% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Chinney Investments

Chinney Investments Doesn't Earn Enough To Cover Its Payments

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last payment made up 84% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

If the company can't turn things around, EPS could fall by 56.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 191%, which could put the dividend in jeopardy if the company's earnings don't improve.

Chinney Investments Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The last annual payment of HK$0.05 was flat on the annual payment from10 years ago. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Chinney Investments' EPS has fallen by approximately 56% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Our Thoughts On Chinney Investments' Dividend

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 company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would probably look elsewhere for an income investment.

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 4 warning signs for Chinney Investments (2 shouldn't be ignored!) that you should be aware of before investing. 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.