Yantai Zhenghai Magnetic Material (SZSE:300224) Has Affirmed Its Dividend Of CN¥0.20

The board of Yantai Zhenghai Magnetic Material Co., Ltd. (SZSE:300224) has announced that it will pay a dividend on the 26th of April, with investors receiving CN¥0.20 per share. This payment means that the dividend yield will be 1.9%, which is around the industry average.

Check out our latest analysis for Yantai Zhenghai Magnetic Material

Yantai Zhenghai Magnetic Material's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, Yantai Zhenghai Magnetic Material's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 60.0%. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was CN¥0.0167 in 2014, and the most recent fiscal year payment was CN¥0.20. This works out to be a compound annual growth rate (CAGR) of approximately 28% a year over that time. Yantai Zhenghai Magnetic Material 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Yantai Zhenghai Magnetic Material has seen EPS rising for the last five years, at 51% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like Yantai Zhenghai Magnetic Material's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Yantai Zhenghai Magnetic Material that investors need to be conscious of moving forward. Is Yantai Zhenghai Magnetic Material not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.