In recent years, the capital market has seen a surge in the "dividend trend," with institutional holdings largely leaning towards dividend strategies and focusing on varieties with stable cash return characteristics. Against this backdrop, companies with high dividends and high dividend payouts have become the new favorites of market investors, especially those that can maintain performance growth and continuous dividend payments in uncertain market environments, which are even more favored by the market.
Recently, I noticed that Yuehai Investment, a Hong Kong-listed company that recently announced its interim financial report, has maintained a high dividend payout ratio over the years, with the current dividend yield reaching 7%. In this interim financial report, the company announced an interim dividend of HKD 23.97 per share, a year-on-year increase of 28.1% from the previous year's 18.71 Hong Kong cents, while the dividend payout ratio remained unchanged at a high level of 65%.
It can be said that this company meets the aforementioned characteristics of high dividends, high dividend yields, and good operating performance against the trend. It is worth mentioning that with the release of the financial report, the company's stock price once surged by 10%, which shows that the capital market has voted with real money for the company's confidence.
Let's take a look at the opportunities it offers.
1. The ability to cash in has been consolidated, and the financial fundamentals have been continuously strengthened.
Looking at the semi-annual financial report submitted by Yuehai Investment in the first half of the year, the overall performance is commendable.
In summary, the highlights of the interim performance are as follows.
Firstly, the company's business operations continue to be consolidated, and the overall performance remains at a stable level.In the first half of the year, Yuehai Investment achieved a comprehensive revenue of HKD 12.291 billion, representing an 8.1% year-on-year increase. Excluding the changes in the fair value of investment properties and the write-down of properties under development for sale, the company's unaudited comprehensive profit before tax increased by 0.9% year-on-year, reaching HKD 3.725 billion.
It is evident that against the backdrop of an overall macroeconomic environment experiencing pressure, Yuehai Investment has still delivered a solid operational performance report.
Looking at the drivers of revenue growth provided in the financial report, the main contribution comes from the increased revenue in the company's property investment and development business. This indicates that the company's strategic adjustments in the real estate market have been effective, leveraging precise execution and market positioning, especially in inventory reduction and property value enhancement strategies, which have effectively driven revenue growth.
The financial report shows that in the first half of the year, the revenue from the company's property investment and development segment doubled.
Additionally, it is undeniable that the profound adjustment in the real estate industry has brought pressure to the performance side. The company, through a diversified business structure, particularly the stable growth in water resources and power generation businesses, has provided support for its overall performance to achieve a robust outcome.
Secondly, the company's ability to monetize has been enhanced, and cash flow has significantly strengthened.
The financial report indicates that in the first half of the year, the net cash inflow from operating activities was approximately HKD 4.876 billion, a year-on-year increase of about 12.0%. Among them, Yuehai Land, as an important business segment of the company, contributed positively to the overall operating cash flow of Yuehai Investment with its good property sales in the first half of the year, with a net cash inflow from operating activities of approximately HKD 1.292 billion.The significant increase in the net cash inflow from operating activities indicates a strengthening of the company's internal cash generation capabilities. In other words, the company is able to generate more cash through its own operations, and a robust cash flow also provides greater financial stability, enabling it to better cope with market fluctuations and potential business risks.
Ultimately, the company has demonstrated a continuously solid financial foundation, thanks to a series of proactive measures in financial management. By actively promoting debt reduction strategies and optimizing capital structure, the company has effectively reduced its reliance on debt financing, thereby enhancing financial stability. The effectiveness of this strategy is clearly reflected in the financial data for the first half of the year: financial borrowings were reduced to 41.645 billion Hong Kong dollars, and as of the end of June 2024, the company's capital debt ratio also decreased from 77.3% at the beginning of the year to 71.1%.
At the same time, the company has ample cash reserves, providing strong support for dealing with future investment opportunities or potential market fluctuations. As of the first half of the year, the company's cash and bank balances increased to 13.135 billion Hong Kong dollars, up 4.3% from the end of last year. The abundant cash on hand not only provides liquidity assurance for daily operations but also offers flexibility for the company to seek expansion and growth in a highly competitive market.
Overall, Guangdong Investment's financial report shows the company's positive progress in maintaining steady business development, improving cash conversion capabilities, and strengthening cash flow. These achievements not only provide a solid financial foundation for the company but also send a positive signal to the market.
After experiencing the turmoil brought about by the adjustment of the real estate industry, the company may have reached a new inflection point and is poised to embark on a higher quality development path.
2. How to view the high-quality asset attributes of Guangdong Investment?
At present, facing the complex and ever-changing global economic environment, under the pessimistic expectations of market sentiment, investors increasingly favor high-quality assets that can provide stability and long-term value.
As a company with stable performance and strong cash flow in several key areas, the high-quality asset attributes of Guangdong Investment can be analyzed from the following aspects:Firstly, the robust operational capability under continuous verification and a history of excellent profitability records.
Looking at the long-term operational development of the company, Yuehai Investment has demonstrated its operational resilience across different economic cycles.
In terms of the key indicator of profitability and capital efficiency, ROE, Yuehai Investment has maintained this indicator at 10% over the long term. Even in recent years, against the backdrop of deep adjustments in one of its core business segments, the real estate business, this indicator has remained relatively stable overall, withstanding the pressure.
Secondly, the superiority of the business model, the stability and certainty of cash cow businesses.
Yuehai Investment's business covers multiple fields, including water resources, property investment and development, department store operations, hotel management, energy, roads, and bridges. This diversified business layout enables the company to effectively spread risks and ensure operational stability.
Based on this layout, the company has shown strong adaptability to market cycle changes, which is not only reflected in its ability to respond quickly to market changes but also in the quality of its profitability.
It can be seen that the company's profitability does not rely on a single business or market, but is achieved through a diversified business layout, especially by focusing on cash cow businesses with cross-cycle attributes, such as the water resources sector and highways, which have realized the stability and sustainability of profitability. The adjustment of the real estate market in the past has brought certain performance pressures, and now, with the industry gradually recovering, it also brings elasticity and certainty to subsequent performance.
Considering the settlement mechanism of real estate companies, it can be seen that as of June 30, 2024, Yuehai Land held a total of HKD 30.613 billion in properties for sale, of which the sales amount of properties that have been signed and received payments but not delivered is approximately HKD 10.331 billion. Both the abundant inventory reserves and the huge resources of sold but not settled accounts provide certain support for the company's subsequent performance growth.Thirdly, the predictability of dividends and the safety under high dividends.
Yuehai Investment has always maintained a high dividend payout ratio in its dividend policy, which not only reflects the company's emphasis on shareholder returns but also conveys a signal of good financial health and strong profitability.
According to Wind statistics, from 2006 to the present, the company has paid dividends a total of 37 times, with a cumulative dividend payout of nearly 40 billion Hong Kong dollars. Among them, the dividend payout ratio in 2020, 2021, and 2022 has also been maintained at a high level of over 84%.
Although the company's current dividend payout ratio has declined, considering the complexity of the overall external environment in recent years and the deep adjustments faced by real estate and related business segments, the strategic adjustment of cash dividends at this time also reflects the company's prudent risk control to a certain extent. With the recovery of performance, it is believed that the company will also have flexible adjustments in dividends, with a repair expectation.
In addition, from the perspective of the dividend yield, the current dividend yield of Yuehai Investment has reached 7%, which is already three times that of the current ten-year government bonds, showing sufficient attractiveness.
Considering the current market's pursuit of dividend assets, this also indicates that the company's performance in the capital market is expected to usher in new opportunities in the future.
3. Conclusion
Overall, Yuehai Investment has become a rare "dividend stock" in the current capital market with its steady performance growth and predictable dividend policy, highlighting the quality of assets.
Looking forward, as the global economy gradually recovers and the market environment improves, Yuehai Investment is expected to continue to achieve higher quality development with its diversified business layout and stable business strategy, bringing continuous substantial returns to shareholders. The company's performance in the capital market is also worth looking forward to.
- 23 August'24
Leave Your Comment