Chinney Investments (HKG:216) Is Due To Pay A Dividend Of HK$0.05

Chinney Investments, Limited (HKG:216) has announced that it will pay a dividend of HK$0.05 per share on the 10th of October. Based on this payment, the dividend yield will be 4.3%, which is fairly typical for the industry.

Check out our latest analysis for Chinney Investments

Chinney Investments Doesn't Earn Enough To Cover Its Payments

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Chinney Investments' dividend made up quite a large proportion of earnings but only of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, EPS could fall by 56.2% if the company can't turn things around from the last few years. 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

The company has a sustained record of paying dividends with very little fluctuation. The last annual payment of HK$0.05 was flat on the annual payment from10 years ago. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Earnings per share has been sinking by 56% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Chinney Investments' payments, as there could be some issues with sustaining them into the future. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Chinney Investments has 4 warning signs (and 2 which make us uncomfortable) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.