Renrui Human Resources Technology Holdings Limited (HKG:6919) announced that it would reduce its dividend payable on July 12 to HK$0.24. The yield is still above the industry average at 3.3%.
Check out our latest analysis for Renrui Human Resources Technology Holdings
Renrui Human Resources Technology Holdings payment provides strong revenue coverage
If the payouts aren’t sustainable, a high return for a few years won’t matter much. Renrui Human Resources Technology Holdings is gaining easily enough to cover the dividend, but is disappointed by weak cash flow. Since the company does not provide cash, payment to shareholders will become difficult at some point.
Looking ahead, earnings per share are expected to increase 65.4% over the next year. Assuming the dividend continues on recent trends, we think the payout ratio could be 22% by next year, which is in a fairly sustainable range.
Renrui Human Resources Technology Holdings continues to build its balance sheet
The company hasn’t paid a dividend for a very long time, so we can’t really judge the stability of the dividend. That doesn’t mean the company can’t pay a good dividend, just that we want to wait until it can prove itself.
The dividend should increase
Since the track record hasn’t been great, we really want to see earnings per share increase over time. We are encouraged to see that Renrui Human Resources Technology Holdings has grown its earnings per share by 22% annually over the past five years. Rapid earnings growth and a low payout ratio suggest that this company has indeed reinvested in its business. If this continues, this company could have a bright future.
In summary, cutting dividends isn’t ideal, but it can bring the payout back into a more sustainable range. With no cash flow, it’s hard to see how the company can sustain a dividend payment. We would be a bit cautious to rely on this stock primarily for dividend income.
Investors generally tend to favor companies with a consistent and stable dividend policy as opposed to those with an irregular one. However, there are other things for investors to consider when analyzing stock performance. For example, we have identified 3 warning signs for Renrui Human Resources Technology Holdings (1 is significant!) which you should be aware of before investing. Isn’t Renrui Human Resources Technology Holdings quite the opportunity you’ve been looking for? Why not check out our selection of the best dividend stocks.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.