Hangzhou Star Shuaier Electric Appliance (SZSE:002860) Has Affirmed Its Dividend Of CN¥0.10

The board of Hangzhou Star Shuaier Electric Appliance Co., Ltd. (SZSE:002860) has announced that it will pay a dividend of CN¥0.10 per share on the 23rd of May. This means the annual payment will be 1.0% of the current stock price, which is lower than the industry average.

Check out our latest analysis for Hangzhou Star Shuaier Electric Appliance

Hangzhou Star Shuaier Electric Appliance's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Hangzhou Star Shuaier Electric Appliance's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 38.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 11% by next year, which is in a pretty sustainable range.

Hangzhou Star Shuaier Electric Appliance'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 2018, the annual payment back then was CN¥0.084, compared to the most recent full-year payment of CN¥0.10. This means that it has been growing its distributions at 2.9% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

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. It's encouraging to see that Hangzhou Star Shuaier Electric Appliance has been growing its earnings per share at 15% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Hangzhou Star Shuaier Electric Appliance Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Hangzhou Star Shuaier Electric Appliance that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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