Longfor Group Holdings (HKG:960) Has Announced That Its Dividend Will Be Reduced To CN¥0.2525

Longfor Group Holdings Limited (HKG:960) is reducing its dividend from last year's comparable payment to CN¥0.2525 on the 22nd of August. Based on this payment, the dividend yield will be 5.2%, which is lower than the average for the industry.

View our latest analysis for Longfor Group Holdings

Longfor Group Holdings' Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Longfor Group Holdings' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 0.7% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 37%, which is comfortable for the company to continue in the future.

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¥0.228 in 2014, and the most recent fiscal year payment was CN¥0.55. This means that it has been growing its distributions at 9.2% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Longfor Group Holdings has seen earnings per share falling at 7.3% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Longfor Group Holdings has 4 warning signs (and 1 which is concerning) we think you should know about. Is Longfor Group Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.

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