Xi'an Triangle DefenseLtd (SZSE:300775) Is Paying Out A Larger Dividend Than Last Year

Xi'an Triangle Defense Co.,Ltd's (SZSE:300775) dividend will be increasing from last year's payment of the same period to CN¥0.182 on 3rd of July. Despite this raise, the dividend yield of 0.6% is only a modest boost to shareholder returns.

See our latest analysis for Xi'an Triangle DefenseLtd

Xi'an Triangle DefenseLtd's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Xi'an Triangle DefenseLtd's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 72.4% over the next year. If the dividend continues on this path, the payout ratio could be 7.3% by next year, which we think can be pretty sustainable going forward.

Xi'an Triangle DefenseLtd's Dividend Has Lacked Consistency

Xi'an Triangle DefenseLtd has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 5 years was CN¥0.20 in 2019, and the most recent fiscal year payment was CN¥0.182. This works out to be a decline of approximately 1.9% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Xi'an Triangle DefenseLtd has grown earnings per share at 32% per year over the past five years. 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.

Our Thoughts On Xi'an Triangle DefenseLtd's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Xi'an Triangle DefenseLtd (1 is significant!) that you should be aware of before investing. 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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