CNQC International Holdings' (HKG:1240) Dividend Is Being Reduced To HK$0.06

CNQC International Holdings Limited (HKG:1240) has announced it will be reducing its dividend payable on the 29th of June to HK$0.06. This means the annual payment is 9.0% of the current stock price, which is above the average for the industry.

Check out our latest analysis for CNQC International Holdings

CNQC International Holdings' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, CNQC International Holdings was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 17.2% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 37%, which is definitely feasible to continue.

CNQC International Holdings' Dividend Has Lacked Consistency

Looking back, CNQC International Holdings' dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the dividend has gone from HK$0.12 to HK$0.06. The dividend has fallen 50% over that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. CNQC International Holdings' EPS has fallen by approximately 17% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for CNQC International Holdings you should be aware of, and 1 of them is potentially serious. Is CNQC International 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.