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

Yuexiu Transport Infrastructure Limited's (HKG:1052) dividend is being reduced from last year's payment covering the same period to CN¥0.10 on the 29th of June. This payment takes the dividend yield to 4.4%, which only provides a modest boost to overall returns.

See our latest analysis for Yuexiu Transport Infrastructure

Yuexiu Transport Infrastructure's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Yuexiu Transport Infrastructure's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 128.5%. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was CN¥0.163, compared to the most recent full-year payment of CN¥0.174. Its dividends have grown at less than 1% per annum over this time frame. 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.

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. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Yuexiu Transport Infrastructure's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Yuexiu Transport Infrastructure (1 shouldn't be ignored!) that you should be aware of before investing. Is Yuexiu Transport Infrastructure 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.