Yantai Eddie Precision Machinery (SHSE:603638) Has Announced That It Will Be Increasing Its Dividend To CN¥0.12

Yantai Eddie Precision Machinery Co., Ltd. (SHSE:603638) has announced that it will be increasing its dividend from last year's comparable payment on the 18th of June to CN¥0.12. Despite this raise, the dividend yield of 0.8% is only a modest boost to shareholder returns.

See our latest analysis for Yantai Eddie Precision Machinery

Yantai Eddie Precision Machinery's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Yantai Eddie Precision Machinery was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

The next year is set to see EPS grow by 49.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

Yantai Eddie Precision Machinery Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 7 years was CN¥0.0675 in 2017, and the most recent fiscal year payment was CN¥0.12. This works out to be a compound annual growth rate (CAGR) of approximately 8.6% a year over that time. Yantai Eddie Precision Machinery has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Yantai Eddie Precision Machinery hasn't seen much change in its earnings per share over the last five years. If Yantai Eddie Precision Machinery is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Yantai Eddie Precision Machinery's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Yantai Eddie Precision Machinery's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Yantai Eddie Precision Machinery is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Yantai Eddie Precision Machinery that investors should take into consideration. 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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