Stock Analysis

Sichuan Kexin Mechanical and Electrical EquipmentLtd (SZSE:300092) Is Paying Out A Larger Dividend Than Last Year

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Sichuan Kexin Mechanical and Electrical Equipment Co.,Ltd (SZSE:300092) has announced that it will be increasing its dividend from last year's comparable payment on the 14th of May to CN¥0.23. This takes the annual payment to 2.1% of the current stock price, which is about average for the industry.

Check out our latest analysis for Sichuan Kexin Mechanical and Electrical EquipmentLtd

Sichuan Kexin Mechanical and Electrical EquipmentLtd's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Sichuan Kexin Mechanical and Electrical EquipmentLtd is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

The next year is set to see EPS grow by 30.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

SZSE:300092 Historic Dividend May 10th 2024

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from CN¥0.048 total annually to CN¥0.23. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. Sichuan Kexin Mechanical and Electrical EquipmentLtd has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Sichuan Kexin Mechanical and Electrical EquipmentLtd has seen EPS rising for the last five years, at 46% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Sichuan Kexin Mechanical and Electrical EquipmentLtd's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Sichuan Kexin Mechanical and Electrical EquipmentLtd 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. However, there are other things to consider for investors when analysing stock performance. To that end, Sichuan Kexin Mechanical and Electrical EquipmentLtd has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.