Nanjing Inform Storage Equipment (Group) (SHSE:603066) Will Pay A Larger Dividend Than Last Year At CN¥0.145

Nanjing Inform Storage Equipment (Group) Co., Ltd. (SHSE:603066) will increase its dividend from last year's comparable payment on the 16th of July to CN¥0.145. Despite this raise, the dividend yield of 1.6% is only a modest boost to shareholder returns.

View our latest analysis for Nanjing Inform Storage Equipment (Group)

Nanjing Inform Storage Equipment (Group)'s Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Nanjing Inform Storage Equipment (Group) 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.

Looking forward, earnings per share could rise by 5.9% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.

Nanjing Inform Storage Equipment (Group)'s Dividend Has Lacked Consistency

Nanjing Inform Storage Equipment (Group) has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2015, the annual payment back then was CN¥0.082, compared to the most recent full-year payment of CN¥0.145. This works out to be a compound annual growth rate (CAGR) of approximately 6.5% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Nanjing Inform Storage Equipment (Group) might have put its house in order since then, but we remain cautious.

Nanjing Inform Storage Equipment (Group) Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Nanjing Inform Storage Equipment (Group) has grown earnings per share at 5.9% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Nanjing Inform Storage Equipment (Group) will make a great income stock. While Nanjing Inform Storage Equipment (Group) is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 Nanjing Inform Storage Equipment (Group) that investors need to be conscious of moving forward. Is Nanjing Inform Storage Equipment (Group) 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.

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