Everbright Grand China Assets' (HKG:3699) Dividend Will Be Increased To CN¥0.0217

The board of Everbright Grand China Assets Limited (HKG:3699) has announced that it will be paying its dividend of CN¥0.0217 on the 14th of July, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 5.2%, which is in line with the average for the industry.

View our latest analysis for Everbright Grand China Assets

Everbright Grand China Assets' Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, based ont he last payment, Everbright Grand China Assets was earning enough to cover the dividend pretty comfortably. The business is earning enough to make the dividend feasible, but the cash payout ratio of 78% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

EPS is set to fall by 7.4% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 47%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Everbright Grand China Assets' Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The dividend has gone from an annual total of CN¥0.0203 in 2020 to the most recent total annual payment of CN¥0.019. Doing the maths, this is a decline of about 2.2% per year. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Come By

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. In the last five years, Everbright Grand China Assets' earnings per share has shrunk at approximately 7.4% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Our Thoughts On Everbright Grand China Assets' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Everbright Grand China Assets' payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Everbright Grand China Assets has been making. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Everbright Grand China Assets (of which 1 is significant!) 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.