Winstech Precision Holding (SZSE:001319) Has Announced That It Will Be Increasing Its Dividend To CN¥0.38

Winstech Precision Holding Co., LTD. (SZSE:001319) will increase its dividend from last year's comparable payment on the 27th of June to CN¥0.38. This makes the dividend yield 2.4%, which is above the industry average.

Check out our latest analysis for Winstech Precision Holding

Winstech Precision Holding's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite comfortably covered by Winstech Precision Holding's earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Unless the company can turn things around, EPS could fall by 10.4% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 54%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Winstech Precision Holding's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2022, the dividend has gone from CN¥0.35 total annually to CN¥0.38. This implies that the company grew its distributions at a yearly rate of about 4.2% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings per share has been sinking by 10% over the last three years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On Winstech Precision Holding's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Winstech Precision Holding's payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Winstech Precision Holding has been making. We don't think Winstech Precision Holding is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Winstech Precision Holding (of which 1 is potentially serious!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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