Yuexiu Services Group (HKG:6626) Is Due To Pay A Dividend Of CN¥0.088

The board of Yuexiu Services Group Limited (HKG:6626) has announced that it will pay a dividend on the 25th of September, with investors receiving CN¥0.088 per share. This means that the annual payment will be 6.5% of the current stock price, which is in line with the average for the industry.

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Yuexiu Services Group's Future Dividend Projections Appear Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before this announcement, Yuexiu Services Group was paying out 76% of earnings, but a comparatively small 69% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Earnings per share is forecast to rise by 25.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 79%, which is on the higher side, but certainly still feasible.

See our latest analysis for Yuexiu Services Group

Yuexiu Services Group Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The annual payment during the last 3 years was CN¥0.0824 in 2022, and the most recent fiscal year payment was CN¥0.169. This means that it has been growing its distributions at 27% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

Yuexiu Services Group Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Yuexiu Services Group has seen EPS rising for the last five years, at 7.6% per annum. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Yuexiu Services Group that investors should know about before committing capital to this stock. 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.