Tjk Machinery (Tianjin) (SZSE:300823) Will Pay A Larger Dividend Than Last Year At CN¥0.588

Tjk Machinery (Tianjin) Co., Ltd. (SZSE:300823) will increase its dividend from last year's comparable payment on the 5th of June to CN¥0.588. This will take the dividend yield to an attractive 3.0%, providing a nice boost to shareholder returns.

Check out our latest analysis for Tjk Machinery (Tianjin)

Tjk Machinery (Tianjin) Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. This high of a dividend payment could start to put pressure on the balance sheet in the future.

If the company can't turn things around, EPS could fall by 12.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 137%, which could put the dividend in jeopardy if the company's earnings don't improve.

Tjk Machinery (Tianjin) Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The annual payment during the last 4 years was CN¥0.216 in 2020, and the most recent fiscal year payment was CN¥0.588. This means that it has been growing its distributions at 28% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Over the past five years, it looks as though Tjk Machinery (Tianjin)'s EPS has declined at around 12% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

We're Not Big Fans Of Tjk Machinery (Tianjin)'s Dividend

In conclusion, we have some concerns about this dividend, even though it being raised is good. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 4 warning signs for Tjk Machinery (Tianjin) you should be aware of, and 3 of them don't sit too well with us. Is Tjk Machinery (Tianjin) 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.