Yuexiu Transport Infrastructure's (HKG:1052) Dividend Is Being Reduced To CN¥0.10

Yuexiu Transport Infrastructure Limited (HKG:1052) is reducing its dividend from last year's comparable payment to CN¥0.10 on the 29th of June. This means that the dividend yield is 4.6%, which is a bit low when comparing to other companies in the industry.

Check out our latest analysis for Yuexiu Transport Infrastructure

Yuexiu Transport Infrastructure's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. The last payment was quite easily covered by earnings, but it made up 189% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to expand by 131.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 32% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was CN¥0.192, compared to the most recent full-year payment of CN¥0.174. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

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. Yuexiu Transport Infrastructure's earnings per share has shrunk at 14% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Yuexiu Transport Infrastructure's Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 3 warning signs for Yuexiu Transport Infrastructure (of which 1 makes us a bit uncomfortable!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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