Kangping Technology (Suzhou) (SZSE:300907) Is Increasing Its Dividend To CN¥0.50

The board of Kangping Technology (Suzhou) Co., Ltd. (SZSE:300907) has announced that it will be paying its dividend of CN¥0.50 on the 31st of May, an increased payment from last year's comparable dividend. This takes the dividend yield to 2.5%, which shareholders will be pleased with.

View our latest analysis for Kangping Technology (Suzhou)

Kangping Technology (Suzhou)'s Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment made up 79% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Unless the company can turn things around, EPS could fall by 5.1% over the next year. Assuming the dividend continues along recent trends, the payout ratio in 12 months could be 69%, which is more comfortable than the current payout ratio.

Kangping Technology (Suzhou)'s Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The dividend has gone from an annual total of CN¥0.25 in 2021 to the most recent total annual payment of CN¥0.50. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. Kangping Technology (Suzhou) has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth Is Doubtful

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Kangping Technology (Suzhou) has seen earnings per share falling at 5.1% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Kangping Technology (Suzhou) will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

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. Case in point: We've spotted 3 warning signs for Kangping Technology (Suzhou) (of which 2 can't be ignored!) 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.