Gold cup Electric ApparatusLtd's (SZSE:002533) Shareholders Will Receive A Bigger Dividend Than Last Year

Gold cup Electric Apparatus Co.,Ltd.'s (SZSE:002533) dividend will be increasing from last year's payment of the same period to CN¥0.40 on 22nd of May. This makes the dividend yield 4.0%, which is above the industry average.

See our latest analysis for Gold cup Electric ApparatusLtd

Gold cup Electric ApparatusLtd's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last dividend, Gold cup Electric ApparatusLtd is earning enough to cover the payment, but then it makes up 776% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

The next year is set to see EPS grow by 54.2%. If the dividend continues on this path, the payout ratio could be 40% by next year, which we think can be pretty sustainable going forward.

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 dividend has gone from CN¥0.075 total annually to CN¥0.40. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

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. We are encouraged to see that Gold cup Electric ApparatusLtd has grown earnings per share at 23% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Our Thoughts On Gold cup Electric ApparatusLtd's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Gold cup Electric ApparatusLtd's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Gold cup Electric ApparatusLtd that investors should know about before committing capital to this stock. Is Gold cup Electric ApparatusLtd 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.