China Dongxiang (Group) (HKG:3818) Is Due To Pay A Dividend Of CN¥0.0152

China Dongxiang (Group) Co., Ltd. (HKG:3818) has announced that it will pay a dividend of CN¥0.0152 per share on the 24th of December. This means the dividend yield will be fairly typical at 3.6%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that China Dongxiang (Group)'s stock price has increased by 30% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for China Dongxiang (Group)

China Dongxiang (Group)'s Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate China Dongxiang (Group)'s Could Struggle to Maintain Dividend Payments In The Future

China Dongxiang (Group)'s Future Dividends May Potentially Be At Risk

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Even though China Dongxiang (Group) is not generating a profit, it is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Earnings per share is forecast to rise by 115.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was CN¥0.0266 in 2014, and the most recent fiscal year payment was CN¥0.0122. This works out to be a decline of approximately 7.5% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Earnings per share has been sinking by 42% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

China Dongxiang (Group)'s Dividend Doesn't Look Great

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for China Dongxiang (Group) that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.