Shenzhen Riland Industry Group (SZSE:300154) Is Increasing Its Dividend To CN¥0.20

The board of Shenzhen Riland Industry Group Co., Ltd (SZSE:300154) has announced that it will be paying its dividend of CN¥0.20 on the 28th of June, an increased payment from last year's comparable dividend. This makes the dividend yield 3.8%, which is above the industry average.

See our latest analysis for Shenzhen Riland Industry Group

Shenzhen Riland Industry Group Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was higher than its profits, and made up 89% of cash flows. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

Looking forward, EPS could fall by 4.4% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 105%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of CN¥0.10 in 2014 to the most recent total annual payment of CN¥0.20. This means that it has been growing its distributions at 7.2% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Shenzhen Riland Industry Group might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, Shenzhen Riland Industry Group's earnings per share has shrunk at approximately 4.4% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Shenzhen Riland Industry Group has 2 warning signs (and 1 which doesn't sit too well with us) 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.

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