Fujian Nanping Sun Cable's (SZSE:002300) Upcoming Dividend Will Be Larger Than Last Year's

Fujian Nanping Sun Cable Co., Ltd. (SZSE:002300) has announced that it will be increasing its dividend from last year's comparable payment on the 4th of July to CN¥0.16. This makes the dividend yield 3.0%, which is above the industry average.

See our latest analysis for Fujian Nanping Sun Cable

Fujian Nanping Sun Cable's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Fujian Nanping Sun Cable's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

If the trend of the last few years continues, EPS will grow by 6.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 61% by next year, which is in a pretty sustainable range.

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 dividend has gone from CN¥0.167 total annually to CN¥0.16. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Fujian Nanping Sun Cable has grown earnings per share at 6.1% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Fujian Nanping Sun Cable will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Fujian Nanping Sun Cable is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Fujian Nanping Sun Cable has 2 warning signs (and 1 which is significant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com