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

DaFa Properties Group Limited (HKG:6111) will increase its dividend on the 5th of January to HK$0.058, which is 53% higher than last year. Even though the dividend went up, the yield is still quite low at only 1.8%.

See our latest analysis for DaFa Properties Group

DaFa Properties Group's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, DaFa Properties Group's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 38.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 27% by next year, which is in a pretty sustainable range.

DaFa Properties Group's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The dividend has gone from CN¥0.14 in 2019 to the most recent annual payment of CN¥0.096. This works out to a decline of approximately 34% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

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. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On DaFa Properties Group's Dividend

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for DaFa Properties Group that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list 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.
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