Everbright Grand China Assets (HKG:3699) Is Reducing Its Dividend To CN¥0.0066

Everbright Grand China Assets Limited's (HKG:3699) dividend is being reduced from last year's payment covering the same period to CN¥0.0066 on the 12th of July. This means that the annual payment will be 5.9% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Everbright Grand China Assets

Everbright Grand China Assets' Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend was quite easily covered by Everbright Grand China Assets' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Unless the company can turn things around, EPS could fall by 12.2% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 46%, which is definitely feasible to continue.

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. Since 2020, the dividend has gone from CN¥0.0203 total annually to CN¥0.0211. Dividend payments have been growing, but very slowly over the period. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Has Limited Growth Potential

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. Earnings per share has been sinking by 12% 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

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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 don't think Everbright Grand China Assets is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 4 warning signs for Everbright Grand China Assets (1 is a bit concerning!) that you should be aware of before investing. 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.