China Overseas Grand Oceans Group's (HKG:81) Shareholders Will Receive A Smaller Dividend Than Last Year

China Overseas Grand Oceans Group Limited (HKG:81) has announced that on 18th of July, it will be paying a dividend ofCN¥0.15, which a reduction from last year's comparable dividend. However, the dividend yield of 4.9% still remains in a typical range for the industry.

View our latest analysis for China Overseas Grand Oceans Group

China Overseas Grand Oceans Group's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, China Overseas Grand Oceans Group's dividend was only 20% of earnings, however it was paying out 132% of free 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 36.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was CN¥0.0819, compared to the most recent full-year payment of CN¥0.184. This works out to be a compound annual growth rate (CAGR) of approximately 8.4% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. China Overseas Grand Oceans Group might have put its house in order since then, but we remain 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. China Overseas Grand Oceans Group has impressed us by growing EPS at 14% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

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. Just as an example, we've come across 4 warning signs for China Overseas Grand Oceans Group you should be aware of, and 1 of them is potentially serious. Is China Overseas Grand Oceans Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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