Ningxia Qinglong Pipes Industry Group (SZSE:002457) Will Pay A Smaller Dividend Than Last Year

Ningxia Qinglong Pipes Industry Group Co., Ltd. (SZSE:002457) has announced that on 14th of May, it will be paying a dividend ofCN¥0.09, which a reduction from last year's comparable dividend. This payment takes the dividend yield to 1.1%, which only provides a modest boost to overall returns.

View our latest analysis for Ningxia Qinglong Pipes Industry Group

Ningxia Qinglong Pipes Industry Group Doesn't Earn Enough To Cover Its Payments

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Ningxia Qinglong Pipes Industry Group's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Looking forward, EPS could fall by 21.2% 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 reach 176%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was CN¥0.03 in 2014, and the most recent fiscal year payment was CN¥0.09. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Ningxia Qinglong Pipes Industry Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Ningxia Qinglong Pipes Industry Group's EPS has declined at around 21% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

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. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Ningxia Qinglong Pipes Industry Group (of which 1 is potentially serious!) you should know about. 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.