Sijin Intelligent Forming Machinery (SZSE:003025) Is Reducing Its Dividend To CN¥0.20

Sijin Intelligent Forming Machinery Co., Ltd. (SZSE:003025) is reducing its dividend from last year's comparable payment to CN¥0.20 on the 7th of June. This means that the dividend yield is 1.6%, which is a bit low when comparing to other companies in the industry.

Check out our latest analysis for Sijin Intelligent Forming Machinery

Sijin Intelligent Forming Machinery's Dividend Is Well Covered By Earnings

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, Sijin Intelligent Forming Machinery was earning enough to cover the dividend, but it wasn't generating any free cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS could expand by 0.9% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 46%, which is in the range that makes us comfortable with the sustainability of the dividend.

Sijin Intelligent Forming Machinery's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. Since 2021, the annual payment back then was CN¥0.184, compared to the most recent full-year payment of CN¥0.20. This works out to be a compound annual growth rate (CAGR) of approximately 2.9% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Unfortunately, Sijin Intelligent Forming Machinery's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Sijin Intelligent Forming Machinery is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Sijin Intelligent Forming Machinery's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While Sijin Intelligent Forming Machinery is earning enough to cover the payments, the cash flows are lacking. We don't think Sijin Intelligent Forming Machinery is a great stock to add to your portfolio if income is your focus.

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 2 warning signs for Sijin Intelligent Forming Machinery that investors need to be conscious of moving forward. Is Sijin Intelligent Forming Machinery not quite the opportunity you were looking for? Why not check out our selection of top 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.