Hengerda New Materials (Fujian) (SZSE:300946) Is Paying Out A Dividend Of CN¥0.23

Hengerda New Materials (Fujian) Co., Ltd.'s (SZSE:300946) investors are due to receive a payment of CN¥0.23 per share on 23rd of May. This payment means the dividend yield will be 0.9%, which is below the average for the industry.

See our latest analysis for Hengerda New Materials (Fujian)

Hengerda New Materials (Fujian)'s Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Hengerda New Materials (Fujian) was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share could rise by 0.5% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.

Hengerda New Materials (Fujian) Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2021, the dividend has gone from CN¥0.233 total annually to CN¥0.23. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Hengerda New Materials (Fujian) May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Hengerda New Materials (Fujian) hasn't seen much change in its earnings per share over the last five years. While EPS growth is quite low, Hengerda New Materials (Fujian) has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Hengerda New Materials (Fujian)'s Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Hengerda New Materials (Fujian) is a great stock to add to your portfolio if income is your focus.

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 4 warning signs for Hengerda New Materials (Fujian) (of which 2 are a bit unpleasant!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.