CSSC Offshore & Marine Engineering (Group) (HKG:317) dividend to be reduced to HK$0.16
CSSC Offshore & Marine Engineering (Group) Company Limited’s (HKG: 317) dividend is reduced to HK$0.16 on July 13. Despite the reduction, the dividend yield of 3.0% will still be comparable to that of other companies in the sector.
Check out our latest analysis for CSSC Offshore & Marine Engineering (Group)
CSSC Offshore & Marine Engineering (Group) pays more than it earns
Solid dividend yields are great, but they only really help us if the payout is sustainable. Based on the last payout, the profits of CSSC Offshore & Marine Engineering (Group) did not cover the dividend, but rather the company generated sufficient cash. Generally, we think cash is more important than accounting measures of earnings, so with cash flow easily covering the dividend, we don’t think there’s much to worry about.
If the company can’t turn things around, EPS could drop 0.4% over the next year. Assuming the dividend continues to follow recent trends, we believe the payout ratio could reach 342%, which could put pressure on the dividend if earnings do not start to improve.
The company has a long history of dividends, but it doesn’t look good with the cuts of the past. Since 2012, the dividend has increased from CN¥0.077 to CN¥0.14. This means that it increased its distributions by 6.0% per year during this period. It’s good to see the dividend growing at a decent pace, but the dividend has been cut at least once in the past. CSSC Offshore & Marine Engineering (Group) may have tidied up since, but we remain cautious.
CSSC Offshore & Marine Engineering (Group) may struggle to grow dividend
With a relatively volatile dividend, it is even more important to assess whether earnings per share are increasing, which could indicate dividend growth in the future. However, CSSC Offshore & Marine Engineering (Group)’s EPS has remained stable over the past five years, which may prevent the company from paying more each year.
CSSC Offshore & Marine Engineering (Group) dividend does not look sustainable
Overall, it’s not great to see that the dividend has been reduced, but it could be because the payouts were a bit high before. In the past, payments were volatile, but in the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.
It is important to note that companies with a consistent dividend policy will generate greater investor confidence than those with an erratic one. Meanwhile, despite the importance of dividend payouts, these are not the only factors our readers should be aware of when evaluating a company. For example, we chose 4 warning signs for CSSC Offshore & Marine Engineering (Group) that investors should be aware of before committing capital to this security. CSSC Offshore & Marine Engineering (Group) not quite the opportunity you were looking for? Why not check out our selection of the best dividend stocks.
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