Qinhuangdao Port's (HKG:3369) Dividend Is Being Reduced To HK$0.066

Qinhuangdao Port Co., Ltd. (HKG:3369) is reducing its dividend to HK$0.066 on the 25th of August. This payment takes the dividend yield to 5.5%, which only provides a modest boost to overall returns.

Check out our latest analysis for Qinhuangdao Port

Qinhuangdao Port's Earnings Easily Cover the Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Qinhuangdao Port was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 9.8% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.

Qinhuangdao Port's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. The first annual payment during the last 8 years was CN¥0.32 in 2014, and the most recent fiscal year payment was CN¥0.056. The dividend has fallen 83% over that period. A company that decreases its dividend over time generally isn't what we are looking for.

Qinhuangdao Port Could Grow Its Dividend

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. It's encouraging to see Qinhuangdao Port has been growing its earnings per share at 9.8% 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 Qinhuangdao Port's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Qinhuangdao Port 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Qinhuangdao Port that investors should know about before committing capital to this stock. Is Qinhuangdao Port 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.