Ningbo KBE Electrical TechnologyLtd's (SZSE:300863) Dividend Will Be CN¥0.50

Ningbo KBE Electrical Technology Co.,Ltd.'s (SZSE:300863) investors are due to receive a payment of CN¥0.50 per share on 6th of June. This payment means the dividend yield will be 1.0%, which is below the average for the industry.

See our latest analysis for Ningbo KBE Electrical TechnologyLtd

Ningbo KBE Electrical TechnologyLtd's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Ningbo KBE Electrical TechnologyLtd is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 22.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

Ningbo KBE Electrical TechnologyLtd Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 3 years was CN¥0.233 in 2021, and the most recent fiscal year payment was CN¥0.50. This works out to be a compound annual growth rate (CAGR) of approximately 29% a year over that time. Ningbo KBE Electrical TechnologyLtd has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Ningbo KBE Electrical TechnologyLtd has impressed us by growing EPS at 14% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Ningbo KBE Electrical TechnologyLtd's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Ningbo KBE Electrical TechnologyLtd has 3 warning signs (and 2 which are a bit concerning) we think you should know about. Is Ningbo KBE Electrical TechnologyLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.