Weihai Guangtai Airport EquipmentLtd (SZSE:002111) Has Announced That Its Dividend Will Be Reduced To CN¥0.10

Weihai Guangtai Airport Equipment Co.,Ltd (SZSE:002111) has announced that on 12th of July, it will be paying a dividend ofCN¥0.10, which a reduction from last year's comparable dividend. Based on this payment, the dividend yield will be 0.9%, which is lower than the average for the industry.

Check out our latest analysis for Weihai Guangtai Airport EquipmentLtd

Weihai Guangtai Airport EquipmentLtd's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Weihai Guangtai Airport EquipmentLtd was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, EPS could fall by 9.6% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 45%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was CN¥0.0571, 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 5.8% 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. Weihai Guangtai Airport EquipmentLtd might have put its house in order since then, but we remain cautious.

Dividend Growth Is Doubtful

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Weihai Guangtai Airport EquipmentLtd has seen earnings per share falling at 9.6% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

The Dividend Could Prove To Be Unreliable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Weihai Guangtai Airport EquipmentLtd has 3 warning signs (and 1 which can't be ignored) we think you should know about. Is Weihai Guangtai Airport EquipmentLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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