Shenzhen V&T Technologies (SZSE:300484) Has Announced That Its Dividend Will Be Reduced To CN¥0.16

Shenzhen V&T Technologies Co., Ltd.'s (SZSE:300484) dividend is being reduced from last year's payment covering the same period to CN¥0.16 on the 7th of June. This means that the annual payment is 1.1% of the current stock price, which is lower than what the rest of the industry is paying.

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 Shenzhen V&T Technologies' stock price has increased by 69% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Shenzhen V&T Technologies

Shenzhen V&T Technologies Is Paying Out More Than It Is Earning

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, the company was paying out 169% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

EPS is set to fall by 7.3% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 195%, which could put the dividend under pressure if earnings don't start to improve.

Shenzhen V&T Technologies' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the annual payment back then was CN¥0.075, compared to the most recent full-year payment of CN¥0.16. This means that it has been growing its distributions at 9.9% per annum over that time. 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.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that Shenzhen V&T Technologies' earnings per share has fallen at approximately 7.3% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Shenzhen V&T Technologies' Dividend Doesn't Look Great

To sum up, we don't like when dividends are cut, but in this case the dividend may have been too high to begin with. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

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. To that end, Shenzhen V&T Technologies has 3 warning signs (and 2 which are a bit concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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