Shandong Zhangqiu Blower (SZSE:002598) Will Pay A Dividend Of CN¥0.10

Shandong Zhangqiu Blower Co., Ltd (SZSE:002598) has announced that it will pay a dividend of CN¥0.10 per share on the 5th of July. This payment means the dividend yield will be 1.3%, which is below the average for the industry.

Check out our latest analysis for Shandong Zhangqiu Blower

Shandong Zhangqiu Blower's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Shandong Zhangqiu Blower was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share could rise by 4.3% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was CN¥0.20, compared to the most recent full-year payment of CN¥0.10. This works out to be a decline of approximately 6.7% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. However, Shandong Zhangqiu Blower has only grown its earnings per share at 4.3% per annum over the past five years. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Shandong Zhangqiu Blower's payments, as there could be some issues with sustaining them into the future. While Shandong Zhangqiu Blower is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Shandong Zhangqiu Blower 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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