Xiamen East Asia Machinery Industrial's (SZSE:301028) Dividend Will Be Reduced To CN¥0.10

Xiamen East Asia Machinery Industrial Co., Ltd. (SZSE:301028) has announced that on 5th of June, it will be paying a dividend ofCN¥0.10, which a reduction from last year's comparable dividend. This means that the dividend yield is 1.0%, which is a bit low when comparing to other companies in the industry.

View our latest analysis for Xiamen East Asia Machinery Industrial

Xiamen East Asia Machinery Industrial's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, Xiamen East Asia Machinery Industrial's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 6.4% 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 15% by next year, which we think can be pretty sustainable going forward.

Xiamen East Asia Machinery Industrial's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. The annual payment during the last 3 years was CN¥0.32 in 2021, and the most recent fiscal year payment was CN¥0.10. This works out to a decline of approximately 69% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Xiamen East Asia Machinery Industrial Could Grow Its Dividend

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. It's encouraging to see that Xiamen East Asia Machinery Industrial has been growing its earnings per share at 6.4% a year over the past five years. Xiamen East Asia Machinery Industrial definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Xiamen East Asia Machinery Industrial's Dividend

Overall, we think that Xiamen East Asia Machinery Industrial could make a reasonable income stock, even though it did cut the dividend this year. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Xiamen East Asia Machinery Industrial that investors need to be conscious of moving forward. Is Xiamen East Asia Machinery Industrial not quite the opportunity you were looking for? Why not check out our selection of top 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.