Shenzhen Investment Holdings Bay Area Development (HKG:737) Is Reducing Its Dividend To CN¥0.0774

Shenzhen Investment Holdings Bay Area Development Company Limited (HKG:737) has announced that on 15th of July, it will be paying a dividend ofCN¥0.0774, which a reduction from last year's comparable dividend. However, the dividend yield of 8.7% is still a decent boost to shareholder returns.

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Shenzhen Investment Holdings Bay Area Development's Projections Indicate Future Payments May Be Unsustainable

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Looking forward, EPS could fall by 5.5% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 112%, which could put the dividend under pressure if earnings don't start to improve.

Check out our latest analysis for Shenzhen Investment Holdings Bay Area Development

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was CN¥0.179, compared to the most recent full-year payment of CN¥0.15. This works out to be a decline of approximately 1.8% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Shenzhen Investment Holdings Bay Area Development has seen earnings per share falling at 5.5% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

We're Not Big Fans Of Shenzhen Investment Holdings Bay Area Development's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, the dividend is not reliable enough to make this 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for Shenzhen Investment Holdings Bay Area Development that investors should know about before committing capital to this stock. Is Shenzhen Investment Holdings Bay Area Development 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.