CIFI Holdings (Group) (HKG:884) Has Announced That Its Dividend Will Be Reduced To HK$0.07

CIFI Holdings (Group) Co. Ltd. (HKG:884) is reducing its dividend to HK$0.07 on the 31st of August. This means that the annual payment is 4.6% of the current stock price, which is lower than what the rest of the industry is paying.

See our latest analysis for CIFI Holdings (Group)

CIFI Holdings (Group)'s Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, CIFI Holdings (Group)'s dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 3.9% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 26%, which we are pretty comfortable with and we think is feasible on an earnings basis.

CIFI Holdings (Group)'s Dividend Has Lacked Consistency

CIFI Holdings (Group) has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2013, the dividend has gone from CN¥0.031 to CN¥0.16. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. CIFI Holdings (Group) has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that CIFI Holdings (Group) has grown earnings per share at 16% per year over the past five years. CIFI Holdings (Group) definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

CIFI Holdings (Group) Looks Like A Great Dividend Stock

In general, we don't like to see the dividend being cut, especially when the company has such high potential like CIFI Holdings (Group) does. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All of these factors considered, we think this has solid potential as a dividend stock.

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. Just as an example, we've come across 5 warning signs for CIFI Holdings (Group) you should be aware of, and 1 of them is a bit concerning. Is CIFI Holdings (Group) 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.