Shanghai Weihong Electronic Technology (SZSE:300508) Will Pay A Smaller Dividend Than Last Year

Shanghai Weihong Electronic Technology Co., Ltd.'s (SZSE:300508) dividend is being reduced from last year's payment covering the same period to CN¥0.0814 on the 24th of May. Based on this payment, the dividend yield will be 0.4%, which is lower than the average for the industry.

Check out our latest analysis for Shanghai Weihong Electronic Technology

Shanghai Weihong Electronic Technology's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, Shanghai Weihong Electronic Technology's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 70.7%. If the dividend continues on this path, the payout ratio could be 16% by next year, which we think can be pretty sustainable going forward.

Shanghai Weihong Electronic Technology's Dividend Has Lacked Consistency

Looking back, Shanghai Weihong Electronic Technology's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of CN¥0.0854 in 2016 to the most recent total annual payment of CN¥0.08. Payments have been decreasing at a very slow pace in this time period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend's Growth Prospects Are Limited

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. However, Shanghai Weihong Electronic Technology has only grown its earnings per share at 2.4% per annum over the past five years. While growth may be thin on the ground, Shanghai Weihong Electronic Technology could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for Shanghai Weihong Electronic Technology that investors need to be conscious of moving forward. Is Shanghai Weihong Electronic 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.