Excellence Commercial Property & Facilities Management Group (HKG:6989) Has Announced That Its Dividend Will Be Reduced To CN¥0.0609

Excellence Commercial Property & Facilities Management Group Limited (HKG:6989) has announced that on 11th of July, it will be paying a dividend ofCN¥0.0609, which a reduction from last year's comparable dividend. The dividend yield of 6.8% is still a nice boost to shareholder returns, despite the cut.

View our latest analysis for Excellence Commercial Property & Facilities Management Group

Excellence Commercial Property & Facilities Management Group's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Excellence Commercial Property & Facilities Management Group's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 96.6% over the next year. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

Excellence Commercial Property & Facilities Management Group's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The annual payment during the last 2 years was CN¥0.0784 in 2021, and the most recent fiscal year payment was CN¥0.181. This implies that the company grew its distributions at a yearly rate of about 52% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

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. Excellence Commercial Property & Facilities Management Group has seen EPS rising for the last three years, at 19% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

We Really Like Excellence Commercial Property & Facilities Management Group's Dividend

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Excellence Commercial Property & Facilities Management Group has the makings of a solid income stock moving forward. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Excellence Commercial Property & Facilities Management 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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