DaFa Properties Group's (HKG:6111) Shareholders Will Receive A Bigger Dividend Than Last Year

DaFa Properties Group Limited's (HKG:6111) dividend will be increasing to HK$0.058 on 5th of January. Although the dividend is now higher, the yield is only 1.8%, which is below the industry average.

See our latest analysis for DaFa Properties Group

DaFa Properties Group's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, DaFa Properties Group was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 38.2%. If the dividend continues on this path, the payout ratio could be 17% by next year, which we think can be pretty sustainable going forward.

DaFa Properties Group's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The first annual payment during the last 2 years was CN¥0.14 in 2019, and the most recent fiscal year payment was CN¥0.082. Dividend payments have fallen sharply, down 43% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. We are encouraged to see that DaFa Properties Group has grown earnings per share at 28% per year over the past three years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think DaFa Properties Group's payments are rock solid. While DaFa Properties Group is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for DaFa Properties Group that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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