Shandong Sacred Sun Power SourcesLtd (SZSE:002580) Has Announced That It Will Be Increasing Its Dividend To CN¥0.057

Shandong Sacred Sun Power Sources Co.,Ltd (SZSE:002580) will increase its dividend from last year's comparable payment on the 21st of June to CN¥0.057. Despite this raise, the dividend yield of 0.9% is only a modest boost to shareholder returns.

Check out our latest analysis for Shandong Sacred Sun Power SourcesLtd

Shandong Sacred Sun Power SourcesLtd's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Shandong Sacred Sun Power SourcesLtd's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share could rise by 51.6% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 9.4% by next year, which we think can be pretty sustainable going forward.

Shandong Sacred Sun Power SourcesLtd's Dividend Has Lacked Consistency

Shandong Sacred Sun Power SourcesLtd has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of CN¥0.0347 in 2015 to the most recent total annual payment of CN¥0.057. This implies that the company grew its distributions at a yearly rate of about 5.7% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Shandong Sacred Sun Power SourcesLtd has been growing its earnings per share at 52% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Shandong Sacred Sun Power SourcesLtd will make a great income stock. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Shandong Sacred Sun Power SourcesLtd that you should be aware of before investing. 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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