YanTai LongYuan Power Technology's (SZSE:300105) Shareholders Will Receive A Smaller Dividend Than Last Year

YanTai LongYuan Power Technology Co., Ltd.'s (SZSE:300105) dividend is being reduced from last year's payment covering the same period to CN¥0.15 on the 24th of May. The dividend yield of 2.1% is still a nice boost to shareholder returns, despite the cut.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that YanTai LongYuan Power Technology's stock price has increased by 49% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for YanTai LongYuan Power Technology

YanTai LongYuan Power Technology's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, YanTai LongYuan Power Technology's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

If the trend of the last few years continues, EPS will grow by 60.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was CN¥0.0833, compared to the most recent full-year payment of CN¥0.15. This implies that the company grew its distributions at a yearly rate of about 6.1% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. YanTai LongYuan Power Technology might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

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. It's encouraging to see that YanTai LongYuan Power Technology has been growing its earnings per share at 61% a year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that YanTai LongYuan Power Technology could prove to be a strong dividend payer.

Our Thoughts On YanTai LongYuan Power Technology's Dividend

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. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 1 warning sign for YanTai LongYuan Power Technology that investors should know about before committing capital to this stock. Is YanTai LongYuan Power Technology 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.