Beijing Relpow Technology (SZSE:300593) Has Announced That Its Dividend Will Be Reduced To CN¥0.10

Beijing Relpow Technology Co., Ltd (SZSE:300593) is reducing its dividend from last year's comparable payment to CN¥0.10 on the 28th of May. Based on this payment, the dividend yield will be 1.0%, which is lower than the average for the industry.

Check out our latest analysis for Beijing Relpow Technology

Beijing Relpow Technology Might Find It Hard To Continue The Dividend

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Despite not generating a profit, Beijing Relpow Technology is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Over the next year, EPS is forecast to expand by 70.1%. This is the right direction to be moving, but it is not enough to achieve profitability. Unless this can be done in short order, the dividend might be difficult to sustain.

Beijing Relpow Technology's Dividend Has Lacked Consistency

Looking back, Beijing Relpow Technology's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the dividend has gone from CN¥0.0172 total annually to CN¥0.10. This works out to be a compound annual growth rate (CAGR) of approximately 29% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Company Could Face Some Challenges Growing The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Beijing Relpow Technology has impressed us by growing EPS at 18% per year over the past five years. It's not great that the company is not turning a profit, but the decent growth in recent years is certainly a positive sign. Assuming the company can post positive net income numbers soon, it could has the potential to be a decent dividend payer.

Beijing Relpow Technology's Dividend Doesn't Look Sustainable

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. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We don't think Beijing Relpow Technology is a great stock to add to your portfolio if income is your focus.

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. For example, we've identified 2 warning signs for Beijing Relpow Technology (1 is significant!) that you should be aware of before investing. Is Beijing Relpow 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.