Suzhou Huaya Intelligence Technology's (SZSE:003043) Dividend Is Being Reduced To CN¥0.25

Suzhou Huaya Intelligence Technology Co., Ltd.'s (SZSE:003043) dividend is being reduced from last year's payment covering the same period to CN¥0.25 on the 6th of June. This means that the annual payment is 0.6% of the current stock price, which is lower than what the rest of the industry is paying.

Check out our latest analysis for Suzhou Huaya Intelligence Technology

Suzhou Huaya Intelligence Technology'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, Suzhou Huaya Intelligence Technology was earning enough to cover the dividend, but free cash flows weren't positive. 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. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

Suzhou Huaya Intelligence Technology Is Still Building Its Track Record

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

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. Although it's important to note that Suzhou Huaya Intelligence Technology's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While EPS growth is quite low, Suzhou Huaya Intelligence Technology has the option to increase the payout ratio to return more cash to shareholders.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Suzhou Huaya Intelligence Technology that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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