China Feihe (HKG:6186) Is Reducing Its Dividend To CN¥0.1209
China Feihe Limited's (HKG:6186) dividend is being reduced from last year's payment covering the same period to CN¥0.1209 on the 24th of September. The yield is still above the industry average at 7.4%.
China Feihe's Projected Earnings Seem Likely To Cover Future Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. At the time of the last dividend payment, China Feihe was paying out a very large proportion of what it was earning and 101% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.
Looking forward, earnings per share is forecast to rise by 60.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 59%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.
Check out our latest analysis for China Feihe
China Feihe Doesn't Have A Long Payment History
China Feihe's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2020, the dividend has gone from CN¥0.174 total annually to CN¥0.297. This means that it has been growing its distributions at 11% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
Dividend Growth Potential Is Shaky
Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Over the past five years, it looks as though China Feihe's EPS has declined at around 12% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
China Feihe's Dividend Doesn't Look Sustainable
In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for China Feihe that investors should take into consideration. 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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