Hunan Zhongke Electric (SZSE:300035) Has Affirmed Its Dividend Of CN¥0.15

Hunan Zhongke Electric Co., Ltd. (SZSE:300035) has announced that it will pay a dividend of CN¥0.15 per share on the 5th of June. The dividend yield is 1.6% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Hunan Zhongke Electric

Hunan Zhongke Electric's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, Hunan Zhongke Electric was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 15%, so there isn't too much pressure on the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of CN¥0.0769 in 2014 to the most recent total annual payment of CN¥0.15. This implies that the company grew its distributions at a yearly rate of about 6.9% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Hunan Zhongke Electric May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Hunan Zhongke Electric hasn't seen much change in its earnings per share over the last five years. The company has been growing at a pretty soft 0.5% per annum, and is paying out quite a lot of its earnings to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

Overall, a consistent dividend is a good thing, and we think that Hunan Zhongke Electric has the ability to continue this into the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Hunan Zhongke Electric that investors should know about before committing capital to this stock. Is Hunan Zhongke Electric not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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