Guangzhou Haoyang ElectronicLtd (SZSE:300833) Has Announced That It Will Be Increasing Its Dividend To CN¥2.40

Guangzhou Haoyang Electronic Co.,Ltd.'s (SZSE:300833) dividend will be increasing from last year's payment of the same period to CN¥2.40 on 11th of June. This makes the dividend yield 3.0%, which is above the industry average.

Check out our latest analysis for Guangzhou Haoyang ElectronicLtd

Guangzhou Haoyang ElectronicLtd's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Guangzhou Haoyang ElectronicLtd's dividend was only 55% of earnings, however it was paying out 146% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to rise by 76.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 50%, which is in the range that makes us comfortable with the sustainability of the dividend.

Guangzhou Haoyang ElectronicLtd Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of CN¥0.40 in 2021 to the most recent total annual payment of CN¥2.40. This works out to be a compound annual growth rate (CAGR) of approximately 82% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Guangzhou Haoyang ElectronicLtd has seen EPS rising for the last five years, at 15% per annum. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Guangzhou Haoyang ElectronicLtd will make a great income stock. 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. Case in point: We've spotted 2 warning signs for Guangzhou Haoyang ElectronicLtd (of which 1 is concerning!) you should know about. 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.