China Motor Bus Company (HKG:26) Has Announced A Dividend Of HK$1.10

China Motor Bus Company, Limited's (HKG:26) investors are due to receive a payment of HK$1.10 per share on 27th of June. This means the dividend yield will be fairly typical at 4.5%.

View our latest analysis for China Motor Bus Company

China Motor Bus Company Might Find It Hard To Continue The Dividend

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. This makes us feel that the dividend will be hard to maintain.

Recent, EPS has fallen by 53.4%, so this could continue over the next year. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was HK$2.30, compared to the most recent full-year payment of HK$3.20. This implies that the company grew its distributions at a yearly rate of about 3.4% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. China Motor Bus Company's earnings per share has shrunk at 53% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

We're Not Big Fans Of China Motor Bus Company's Dividend

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for China Motor Bus Company that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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