Moon Environment TechnologyLtd (SZSE:000811) Has Announced That Its Dividend Will Be Reduced To CN¥0.10

Moon Environment Technology Co.,Ltd. (SZSE:000811) has announced that on 26th of June, it will be paying a dividend ofCN¥0.10, which a reduction from last year's comparable dividend. This payment takes the dividend yield to 1.0%, which only provides a modest boost to overall returns.

Check out our latest analysis for Moon Environment TechnologyLtd

Moon Environment TechnologyLtd's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Moon Environment TechnologyLtd 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.

Over the next year, EPS is forecast to expand by 40.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 9.2% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was CN¥0.0667, compared to the most recent full-year payment of CN¥0.10. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Moon Environment TechnologyLtd May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Moon Environment TechnologyLtd has only grown its earnings per share at 3.1% per annum over the past five years. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Our Thoughts On Moon Environment TechnologyLtd's Dividend

Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Moon Environment TechnologyLtd that investors need to be conscious of moving forward. Is Moon Environment TechnologyLtd 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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