Excellence Commercial Property & Facilities Management Group's (HKG:6989) Dividend Is Being 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. This means that the annual payment will be 4.5% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Excellence Commercial Property & Facilities Management Group

Excellence Commercial Property & Facilities Management Group's 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. Prior to this announcement, Excellence Commercial Property & Facilities Management Group was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Over the next year, EPS is forecast to expand by 96.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

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

Even in its short history, we have seen the dividend cut. The dividend has gone from an annual total of CN¥0.0784 in 2021 to the most recent total annual payment of CN¥0.107. This means that it has been growing its distributions at 17% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

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. We are encouraged to see that Excellence Commercial Property & Facilities Management Group has grown earnings per share at 19% per year over the past three years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Excellence Commercial Property & Facilities Management Group (of which 1 shouldn't be ignored!) 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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