AECC Aviation PowerLtd (SHSE:600893) Is Increasing Its Dividend To CN¥0.16

AECC Aviation Power Co.,Ltd (SHSE:600893) will increase its dividend from last year's comparable payment on the 27th of June to CN¥0.16. This takes the annual payment to 0.4% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for AECC Aviation PowerLtd

AECC Aviation PowerLtd's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, AECC Aviation PowerLtd was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise by 49.3% over the next year. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.

AECC Aviation PowerLtd Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from CN¥0.083 total annually to CN¥0.16. This means that it has been growing its distributions at 6.8% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, AECC Aviation PowerLtd has only grown its earnings per share at 2.4% per annum over the past five years. If AECC Aviation PowerLtd is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think AECC Aviation PowerLtd's payments are rock solid. 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. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for AECC Aviation PowerLtd that investors need to be conscious of moving forward. Is AECC Aviation PowerLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com