Ronshine China Holdings (HKG: 3301) to pay lower dividend than last year

Ronshine China Holdings Limited (HKG: 3301) reduces its dividend to HK $ 0.50 on August 27. The return is still above the industry average at 9.6%.

Check out our latest analysis for Ronshine China Holdings

Ronshine China Holdings profits easily cover distributions

If the payments are not sustainable, a high return for a few years will not matter much. Based on the last payment, Ronshine China Holdings was earning enough to cover the dividend, but free cash flow was not positive. As the company does not provide cash, payment to shareholders will inevitably become difficult at some point.

Looking ahead, earnings per share are expected to drop 17.8% over the next year. Assuming that the dividend continues according to recent trends, we think the payout ratio could be 43% which we feel is quite comfortable and we think it is doable on an earnings basis.

SEHK: 3,301 Historic dividend June 7, 2021

Ronshine China Holdings dividend lacks consistency

Looking back, the dividend has been volatile but with a relatively short history, we think it may be a bit early to draw conclusions about the long-term sustainability of dividends. The dividend went from 0.32 CN in 2019 to the last annual payment of 0.41 CN. This works out to a compound annual growth rate (CAGR) of around 13% per year over that time period. Ronshine China Holdings has increased its distributions at a rapid pace despite the dividend cut at least once in the past. Companies that cut once often cut again, so we would be cautious about buying these stocks just for dividend income.

Prospects for dividend growth are limited

With a relatively volatile dividend, it is even more important to see if earnings per share increase. While it’s important to note that Ronshine China Holdings earnings per share have barely increased from what they were five years ago, which could erode the purchasing power of the dividend over the years. time. Although growth may be slender on the ground, Ronshine China Holdings could still pay a higher proportion of its profits to increase shareholder returns.

Our thoughts on the Ronshine China Holdings dividend

In summary, reducing dividends is not ideal, but it can bring the payout into a more sustainable range. While Ronshine China Holdings earns enough to cover payments, cash flow is lacking. This company is not in the top bracket of income providing stocks.

Companies with a stable dividend policy are likely to benefit from greater investor interest than those with a more inconsistent approach. At the same time, there are other factors that our readers should be aware of before investing any capital in a stock. As an example, we have met 2 warning signs for Ronshine China Holdings you need to be aware of it, and one of them is a little rude. If you are a dividend investor, you can also view our curated list of high performing dividend stocks.

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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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