Longfor Group Holdings' (HKG:960) Dividend Will Be Reduced To CN¥0.8768

Longfor Group Holdings Limited (HKG:960) is reducing its dividend from last year's comparable payment to CN¥0.8768 on the 21st of August. Despite the cut, the dividend yield of 6.0% will still be comparable to other companies in the industry.

View our latest analysis for Longfor Group Holdings

Longfor Group Holdings' Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Longfor Group Holdings was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 6.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was CN¥0.20 in 2013, and the most recent fiscal year payment was CN¥1.13. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. 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

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. Longfor Group Holdings has seen EPS rising for the last five years, at 12% per annum. Longfor Group Holdings definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Longfor Group Holdings' Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Longfor Group Holdings does. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 4 warning signs for Longfor Group Holdings (1 is concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.