East China Engineering Science and Technology (SZSE:002140) Is Increasing Its Dividend To CN¥0.11

East China Engineering Science and Technology Co., Ltd. (SZSE:002140) has announced that it will be increasing its dividend from last year's comparable payment on the 26th of June to CN¥0.11. Despite this raise, the dividend yield of 1.4% is only a modest boost to shareholder returns.

Check out our latest analysis for East China Engineering Science and Technology

East China Engineering Science and Technology's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, East China Engineering Science and Technology's earnings easily 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 is forecast to rise by 31.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 17% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of CN¥0.0417 in 2014 to the most recent total annual payment of CN¥0.11. This means that it has been growing its distributions at 10% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

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. East China Engineering Science and Technology has impressed us by growing EPS at 14% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for East China Engineering Science and Technology's prospects of growing its dividend payments in the future.

East China Engineering Science and Technology Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

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. For example, we've picked out 1 warning sign for East China Engineering Science and Technology that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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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