Stock Analysis
China Resources Cement Holdings Limited (HKG:1313) is reducing its dividend from last year's comparable payment to HK$0.009 on the 19th of July. This means that the dividend yield is 2.9%, which is a bit low when comparing to other companies in the industry.
Check out our latest analysis for China Resources Cement Holdings
Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, China Resources Cement Holdings' dividend was only 47% of earnings, however it was paying out 321% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.
Looking forward, earnings per share is forecast to rise by 135.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 23% by next year, which is in a pretty sustainable range.
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the dividend has gone from HK$0.07 total annually to HK$0.129. This means that it has been growing its distributions at 6.3% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. China Resources Cement Holdings' earnings per share has shrunk at 13% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While China Resources Cement Holdings is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for China Resources Cement Holdings that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
Find out whether China Resources Cement Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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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.
China Resources Cement Holdings Limited, an investment holding company, manufactures and sells cement, concrete, and related products and services in Mainland China and Hong Kong.
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