Everbright Grand China Assets' (HKG:3699) Shareholders Will Receive A Smaller Dividend Than Last Year

The board of Everbright Grand China Assets Limited (HKG:3699) has announced it will be reducing its dividend by 5.9% from last year's payment of CN¥0.0085 on the 31st of October, with shareholders receiving CN¥0.008. Based on this payment, the dividend yield will be 4.8%, which is lower than the average for the industry.

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Everbright Grand China Assets' Payment Could Potentially Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Everbright Grand China Assets was paying only paying out a fraction of earnings, but the payment was a massive 102% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, EPS could fall by 5.9% 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 be 45%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

See our latest analysis for Everbright Grand China Assets

Everbright Grand China Assets' Dividend Has Lacked Consistency

It's comforting to see that Everbright Grand China Assets has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2020, the dividend has gone from CN¥0.0203 total annually to CN¥0.0181. The dividend has shrunk at around 2.2% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Is Doubtful

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's not great to see that Everbright Grand China Assets' earnings per share has fallen at approximately 5.9% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While Everbright Grand China Assets is earning enough to cover the payments, the cash flows are lacking. 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. To that end, Everbright Grand China Assets has 4 warning signs (and 1 which is significant) we think you should know about. Is Everbright Grand China Assets not quite the opportunity you were looking for? Why not check out our selection of top 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.