North Industries Group Red Arrow (SZSE:000519) Will Pay A Dividend Of CN¥0.055

North Industries Group Red Arrow Co., Ltd (SZSE:000519) has announced that it will pay a dividend of CN¥0.055 per share on the 28th of June. This means the annual payment will be 0.4% of the current stock price, which is lower than the industry average.

See our latest analysis for North Industries Group Red Arrow

North Industries Group Red Arrow's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, North Industries Group Red Arrow's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 16.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 8.0% by next year, which is in a pretty sustainable range.

North Industries Group Red Arrow's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2015, the dividend has gone from CN¥0.0429 total annually to CN¥0.055. This works out to be a compound annual growth rate (CAGR) of approximately 2.8% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that North Industries Group Red Arrow has been growing its earnings per share at 21% 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.

We Really Like North Industries Group Red Arrow's Dividend

Overall, we like to see the dividend staying consistent, and we think North Industries Group Red Arrow might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Are management backing themselves to deliver performance? Check their shareholdings in North Industries Group Red Arrow in our latest insider ownership analysis. 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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