Jilin Province Chuncheng Heating (HKG:1853) Is Paying Out Less In Dividends Than Last Year

Jilin Province Chuncheng Heating Company Limited (HKG:1853) has announced that on 7th of July, it will be paying a dividend ofCN¥0.1029, which a reduction from last year's comparable dividend. This means that the dividend yield is 5.1%, which is a bit low when comparing to other companies in the industry.

View our latest analysis for Jilin Province Chuncheng Heating

Jilin Province Chuncheng Heating's Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Jilin Province Chuncheng Heating's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 0.04% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 42%, which is in the range that makes us comfortable with the sustainability of the dividend.

Jilin Province Chuncheng Heating's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The dividend has gone from an annual total of CN¥0.17 in 2020 to the most recent total annual payment of CN¥0.09. This works out to a decline of approximately 47% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. However, Jilin Province Chuncheng Heating's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Our Thoughts On Jilin Province Chuncheng Heating's Dividend

Overall, we think that Jilin Province Chuncheng Heating could make a reasonable income stock, even though it did cut the dividend this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Jilin Province Chuncheng Heating that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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