CIFI Holdings (Group)'s (HKG:884) Shareholders Will Receive A Smaller Dividend Than Last Year

CIFI Holdings (Group) Co. Ltd.'s (HKG:884) dividend is being reduced to HK$0.07 on the 31st of August. However, the dividend yield of 5.2% still remains in a typical range for the industry.

Check out our latest analysis for CIFI Holdings (Group)

CIFI Holdings (Group)'s Earnings Easily Cover the Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, CIFI Holdings (Group) was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 4.5% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 25%, which is comfortable for the company to continue in the future.

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 works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see CIFI Holdings (Group) has been growing its earnings per share at 16% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like CIFI Holdings (Group)'s Dividend

Overall, we think that CIFI Holdings (Group) could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 5 warning signs for CIFI Holdings (Group) (of which 1 can't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection 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.