Changhong Jiahua Holdings (HKG:3991) Has Announced A Dividend Of HK$0.05

Changhong Jiahua Holdings Limited (HKG:3991) has announced that it will pay a dividend of HK$0.05 per share on the 23rd of June. This makes the dividend yield 8.5%, which will augment investor returns quite nicely.

See our latest analysis for Changhong Jiahua Holdings

Changhong Jiahua Holdings' Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Changhong Jiahua Holdings was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 8.4% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

Changhong Jiahua Holdings' Dividend Has Lacked Consistency

Changhong Jiahua Holdings has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 8 years was HK$0.04 in 2015, and the most recent fiscal year payment was HK$0.05. This implies that the company grew its distributions at a yearly rate of about 2.8% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

We Could See Changhong Jiahua Holdings' Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Changhong Jiahua Holdings has grown earnings per share at 8.4% per 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.

Changhong Jiahua Holdings Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Changhong Jiahua Holdings has 2 warning signs (and 1 which is concerning) we think you should know about. 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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