Jy Gas (HKG:1407) Will Pay A Smaller Dividend Than Last Year

Jy Gas Limited (HKG:1407) has announced that on 9th of August, it will be paying a dividend ofCN¥0.033, which a reduction from last year's comparable dividend. The yield is still above the industry average at 7.9%.

Check out our latest analysis for Jy Gas

Jy Gas Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Jy Gas' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

If the company can't turn things around, EPS could fall by 62.3% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 157%, which could put the dividend under pressure if earnings don't start to improve.

Jy Gas Is Still Building Its Track Record

The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Dividend Growth Potential Is Shaky

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Jy Gas has seen EPS fall by 62% over the last 12 months. Reduced dividend payments are a common consequence of declining earnings. Any one year of performance can be misleading for a variety of reasons, so we wouldn't like to form any strong conclusions based on these numbers alone.

Our Thoughts On Jy Gas' Dividend

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. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for Jy Gas (1 is potentially serious!) that you should be aware of before investing. Is Jy Gas not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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