Guangzhou KDT MachineryLtd (SZSE:002833) Will Pay A Smaller Dividend Than Last Year

Guangzhou KDT Machinery Co.,Ltd. (SZSE:002833) has announced that on 18th of October, it will be paying a dividend ofCN¥0.30, which a reduction from last year's comparable dividend. However, the dividend yield of 3.6% is still a decent boost to shareholder returns.

See our latest analysis for Guangzhou KDT MachineryLtd

Guangzhou KDT MachineryLtd's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment was quite easily covered by earnings, but it made up 104% 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.

EPS is set to grow by 16.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 76%, which is on the higher side, but certainly still feasible.

Guangzhou KDT MachineryLtd's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2017, the dividend has gone from CN¥0.051 total annually to CN¥0.60. This means that it has been growing its distributions at 42% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Guangzhou KDT MachineryLtd has been growing its earnings per share at 16% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Guangzhou KDT MachineryLtd's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While Guangzhou KDT MachineryLtd is earning enough to cover the payments, the cash flows are lacking. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Guangzhou KDT MachineryLtd that investors should take into consideration. 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.