Jiangsu Zhongshe Group (SZSE:002883) Has Announced That Its Dividend Will Be Reduced To CN¥0.065

Jiangsu Zhongshe Group Co., Ltd.'s (SZSE:002883) dividend is being reduced from last year's payment covering the same period to CN¥0.065 on the 5th of July. This payment takes the dividend yield to 0.7%, which only provides a modest boost to overall returns.

View our latest analysis for Jiangsu Zhongshe Group

Jiangsu Zhongshe Group's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Jiangsu Zhongshe Group was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 6.7% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 26%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Jiangsu Zhongshe Group's Dividend Has Lacked Consistency

Jiangsu Zhongshe Group has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2018, the annual payment back then was CN¥0.0694, compared to the most recent full-year payment of CN¥0.065. Doing the maths, this is a decline of about 1.1% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Is Doubtful

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Jiangsu Zhongshe Group has seen earnings per share falling at 6.7% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On Jiangsu Zhongshe Group's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Jiangsu Zhongshe Group (of which 1 can't be ignored!) you should know about. Is Jiangsu Zhongshe Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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