Shandong Yulong Gold's (SHSE:601028) Upcoming Dividend Will Be Larger Than Last Year's

The board of Shandong Yulong Gold Co., Ltd. (SHSE:601028) has announced that it will be paying its dividend of CN¥0.05 on the 5th of July, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 0.4% is only a modest boost to shareholder returns.

Check out our latest analysis for Shandong Yulong Gold

Shandong Yulong Gold's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Shandong Yulong Gold's earnings easily covered the dividend, but free cash flows were negative. 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.

Looking forward, earnings per share is forecast to rise by 75.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 5.1%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was CN¥0.114 in 2014, and the most recent fiscal year payment was CN¥0.05. This works out to be a decline of approximately 7.9% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. It's encouraging to see that Shandong Yulong Gold has been growing its earnings per share at 110% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Shandong Yulong Gold will make a great income stock. While Shandong Yulong Gold is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Shandong Yulong Gold has 2 warning signs (and 1 which can't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.

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