China Motor Bus Company's (HKG:26) Dividend Will Be HK$1.80

China Motor Bus Company, Limited (HKG:26) has announced that it will pay a dividend of HK$1.80 per share on the 6th of February. This means the annual payment will be 3.7% of the current stock price, which is lower than the industry average.

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China Motor Bus Company Might Find It Hard To Continue The Dividend

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. China Motor Bus Company is unprofitable despite paying a dividend, and it is paying out 2,021% of its free cash flow. This is quite a strong warning sign that the dividend may not be sustainable.

Over the next year, EPS might fall by 45.0% based on recent performance. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.

See our latest analysis for China Motor Bus Company

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 HK$2.80 in 2015 to the most recent total annual payment of HK$2.20. The dividend has shrunk at around 2.4% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though China Motor Bus Company's EPS has declined at around 45% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

We're Not Big Fans Of China Motor Bus Company's Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help China Motor Bus Company make more consistent payments in the future. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. The dividend doesn't inspire confidence that it will provide solid income in the future.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for China Motor Bus Company that investors should take into consideration. 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.