ZHEJIANG DIBAY ELECTRICLtd (SHSE:603320) Is Increasing Its Dividend To CN¥0.10

ZHEJIANG DIBAY ELECTRIC CO.,Ltd. (SHSE:603320) will increase its dividend from last year's comparable payment on the 27th of May to CN¥0.10. This takes the annual payment to 0.7% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for ZHEJIANG DIBAY ELECTRICLtd

ZHEJIANG DIBAY ELECTRICLtd's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, ZHEJIANG DIBAY ELECTRICLtd was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 2.2% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 26% by next year, which we think can be pretty sustainable going forward.

ZHEJIANG DIBAY ELECTRICLtd's Dividend Has Lacked Consistency

It's comforting to see that ZHEJIANG DIBAY ELECTRICLtd has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2018, the dividend has gone from CN¥0.12 total annually to CN¥0.10. This works out to be a decline of approximately 3.0% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

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 have grown at around 2.2% a year for the past five years, which isn't massive but still better than seeing them shrink. While growth may be thin on the ground, ZHEJIANG DIBAY ELECTRICLtd could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for ZHEJIANG DIBAY ELECTRICLtd (1 is a bit unpleasant!) that you should be aware of before investing. 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.