China New Higher Education Earnings: Change in Dividend Schedule Is Disappointing

China New Higher Education’s, or CNHE’s, fiscal 2023 (ending August) results were in line with our expectations, but the change in dividend schedule is disappointing. CNHE maintained a 50% cash payout ratio, translating to a 12% dividend yield for fiscal 2023 at the current price. However, the final dividend will be distributed next September instead of the usual practice in March. Also, while maintaining the 50% payout ratio in the future, CNHE will cancel the interim dividend and only distribute the final dividend in September annually. While the arrangement helps reduce financing costs, we believe this practice is slightly negative to shareholders from a cash flow perspective. In addition, the change could raise doubt over its cash flow situation and the sustainability of its dividend payout.