China Overseas Grand Oceans Group (HKG:81) Has Announced That Its Dividend Will Be Reduced To CN¥0.05

China Overseas Grand Oceans Group Limited's (HKG:81) dividend is being reduced from last year's payment covering the same period to CN¥0.05 on the 18th of October. Despite the cut, the dividend yield of 5.8% will still be comparable to other companies in the industry.

Check out our latest analysis for China Overseas Grand Oceans Group

China Overseas Grand Oceans Group's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, China Overseas Grand Oceans Group was paying only paying out a fraction of earnings, but the payment was a massive 132% 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, earnings per share is forecast to rise by 54.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was CN¥0.0961 in 2013, and the most recent fiscal year payment was CN¥0.184. This means that it has been growing its distributions at 6.7% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

We Could See China Overseas Grand Oceans Group's Dividend Growing

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. We are encouraged to see that China Overseas Grand Oceans Group has grown earnings per share at 7.1% per year over the past five years. China Overseas Grand Oceans Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On China Overseas Grand Oceans Group's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, China Overseas Grand Oceans Group has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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